Don’t let the thought of a giant owed payment balance scare you. If you owe back taxes, you can often save money by working directly with the IRS on a tax debt repayment plan. An IRS payment plan allows you to pay your tax debt over time in smaller increments. Interest still accrues and late payment fees may still apply, but you can breathe a little easier making smaller payments spread out over a few weeks or months.
You can set up a payment plan with the IRS online, over the phone, or by mail. The cost of getting on a payment plan can vary by application type and payment option. There are three versions of the IRS debt repayment plan:
- Short-term – You have 120 days to pay installments. You must not owe more than $100,000 in back taxes, interest, and penalties
- Extended short-term – You have 180 days to pay installments. You must not owe more than $100,000.
- Long-term – You have 72 months to pay installments. You must not owe more than $50,000.
The short-term and extended IRS installment payment options do not have a setup fee. When you enroll in one of these plans, you can make payments via a money order, debit or credit card, or direct payment through a bank transfer.
The long-term IRS installment payment options do have setup fees, and you may also need to pay fees for paying installments using certain payment types. Here’s a breakdown of associated fees for long-term payment plan options with the IRS:
- Online application with automatic bank withdrawals: $31
- Online application with check, money order, or debit/credit card payments: $149
- Apply in person, by phone, or by mail with automatic withdrawals: $107
- Apply in person, by phone, or by mail with check, money order, or debit/credit card payment options: $225
Americans who owe more than $25,000 in back taxes must pay with automatic withdrawals while enrolled in a long-term payment plan.
- If you pay using a debit card, you will pay an additional $2 to $4 per transaction.
- If you’re paying with a credit card, you will pay an additional 2% of the payment amount per transaction.
You may be able to change your payment amount, due date, and other elements of your IRS payment plan as needed.
Certain tax debt and income situations may qualify you for additional IRS help for a payment plan. If you meet the standards for a low-income taxpayer, you may be able to participate in an IRS hardship program that reduces or eliminates the cost of setup and application fees.