Life can throw unexpected curveballs, and sometimes those curveballs come in the form of an unexpected tax bill from the IRS. It can feel daunting, overwhelming, and even a little scary to realize you owe money you can't immediately pay. But don't panic! The IRS understands that financial difficulties happen, and they offer various payment options to help taxpayers get back on track.
This comprehensive guide will walk you through everything you need to know about calling the IRS for a payment plan, from understanding your options to navigating the call itself. Let's get started on taking control of your tax situation!
Understanding Your IRS Payment Plan Options
Before you even pick up the phone, it's crucial to understand the different types of payment plans the IRS offers. Your eligibility and the best plan for you will depend on the amount you owe and your financial situation.
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| How To Call Irs For Payment Plan |
Short-Term Payment Plan (Extension of Time to Pay)
This is your quickest and simplest option if you need a little more time.
- What it is: This plan allows you up to an additional 180 days to pay your tax liability in full.
- Eligibility: Generally available if you owe less than $100,000 in combined tax, penalties, and interest.
- Costs: There's no setup fee for this plan. However, penalties and interest will continue to accrue on your unpaid balance until it's paid in full.
- Good for: Those who know they can pay their full balance within a few months but just need a temporary reprieve.
Long-Term Payment Plan (Installment Agreement)
If you need more than 180 days, an installment agreement is likely your best bet. This allows you to make monthly payments for up to 72 months (6 years).
- What it is: A formal agreement with the IRS to make monthly payments over an extended period.
- Eligibility for Individuals:
- You owe $50,000 or less in combined tax, penalties, and interest.
- You have filed all required tax returns.
- Direct Debit Installment Agreements (DDIA) are encouraged, and for balances between $25,000 and $50,000, direct debit is generally required.
- Eligibility for Businesses:
- You owe $25,000 or less in combined tax, penalties, and interest from the current and preceding tax year.
- You have filed all required tax returns.
- Direct debit is required for balances between $10,000 and $25,000.
- Costs:
- Direct Debit Installment Agreement (DDIA):
- Online application: $22 setup fee.
- Phone, mail, or in-person application: $107 setup fee.
- Low-income taxpayers may have the setup fee waived.
- Non-Direct Debit Installment Agreement:
- Online application: $69 setup fee.
- Phone, mail, or in-person application: $178 setup fee.
- Low-income taxpayers may have a reduced fee, which may be reimbursed if certain conditions are met.
- Direct Debit Installment Agreement (DDIA):
- Important Note: Penalties and interest continue to accrue, although the failure-to-pay penalty is often reduced while an installment agreement is in effect.
Offer in Compromise (OIC)
An OIC allows you to settle your tax debt for less than the full amount you owe. This is generally for taxpayers who are experiencing significant financial hardship and can demonstrate they cannot pay their full tax liability.
QuickTip: Let each idea sink in before moving on.
- What it is: A formal proposal to the IRS to resolve your tax liability for a lower amount than what's owed.
- Eligibility: The IRS considers your unique facts and circumstances, including your ability to pay, income, expenses, and asset equity. They generally approve an OIC when the amount you offer represents the most they can expect to collect within a reasonable period.
- Key Requirements:
- You must have filed all required tax returns and made all required estimated payments.
- You cannot be in an open bankruptcy proceeding.
- You must explore all other payment options before submitting an OIC.
- Costs: There's a non-refundable $205 application fee, which may be waived for low-income taxpayers. You also need to submit an initial payment with your application, the amount of which depends on your chosen payment option (lump sum or periodic payment).
- Important Note: An OIC is a complex process and is not for everyone. The IRS provides an Offer in Compromise Pre-Qualifier tool on their website (IRS.gov) to help you determine if you might qualify.
Currently Not Collectible (CNC) Status
If you truly cannot afford to pay any of your tax debt, even with an installment agreement, the IRS may temporarily delay collection by placing your account in "Currently Not Collectible" status.
- What it is: The IRS determines you have no ability to pay at the present time.
- Important Note: This is a temporary status. Penalties and interest continue to accrue, and the IRS will periodically review your financial situation to see if it has improved. This does not relieve you of the debt, it just pauses collection efforts.
Step 1: Assess Your Situation and Gather Information
Feeling a little overwhelmed by the options? That's completely normal. Take a deep breath. The first and most crucial step is to understand your current financial standing and gather all necessary documents. This will make your call to the IRS much smoother and more efficient.
Sub-heading: Determine How Much You Owe
- Your Tax Notice: The easiest way to confirm your exact tax liability is to refer to the most recent notice or bill you received from the IRS. This document will clearly state the amount you owe, including any penalties and interest.
- IRS Online Account: If you don't have a recent notice, or want to confirm the most up-to-date balance, you can create or log in to your IRS Online Account at IRS.gov. This provides a secure way to view your tax balance, payment history, and payment plan details. Setting up an online account is highly recommended as it offers many self-service options.
Sub-heading: Analyze Your Financial Capacity
This is where you get realistic about what you can afford. The IRS will want to know your ability to pay.
- Income: List all sources of income, including wages, self-employment income, benefits (Social Security, disability), rental income, etc.
- Expenses: Detail your monthly living expenses. Be prepared to discuss categories like:
- Housing (rent/mortgage, utilities)
- Food
- Transportation (car payments, gas, public transport)
- Medical expenses (insurance, prescriptions, doctor visits)
- Childcare
- Loan payments (student loans, credit cards, personal loans)
- Insurance (health, life, auto)
- Other necessary living expenses.
- The IRS has established national and local standards for certain expenses. While you'll need to provide your actual expenses, they will compare them against these standards.
- Assets: Be aware of any significant assets you own, such as savings accounts, investments, real estate (other than your primary residence, though its equity might be considered for an OIC), and vehicles.
- Outstanding Debts: Document any other significant debts you have, like mortgages, car loans, student loans, or credit card debt.
Sub-heading: Prepare Necessary Documents
Having these readily available will expedite the process during your call.
- Your Social Security Number (SSN) or Taxpayer Identification Number (TIN).
- Your Date of Birth.
- Your Most Recent Tax Notice/Bill.
- Your Filed Tax Returns for the last several years. (The IRS typically looks for the last six years of filed returns when considering payment plans).
- Bank Account Information: If you plan to set up a Direct Debit Installment Agreement, you'll need your bank's routing and account numbers.
- Detailed Income and Expense Information: While you might not need to provide every single receipt, having a clear breakdown of your monthly income and expenses is vital. You may need to complete Form 433-F, Collection Information Statement, or Form 433-A (OIC) or 433-B (OIC) if applying for an Offer in Compromise. The IRS website has these forms available if you want to review them in advance.
Step 2: Choose Your Contact Method
The IRS offers several ways to apply for a payment plan, and the online method is often the quickest and most convenient.
Tip: Reading carefully reduces re-reading.
Sub-heading: Online Payment Agreement (OPA) Tool
- Highly Recommended! For many individual taxpayers, the Online Payment Agreement (OPA) tool on IRS.gov is the fastest, easiest, and most secure way to set up a payment plan.
- Eligibility for OPA:
- Installment Agreement (Long-term): You owe $50,000 or less in combined tax, penalties, and interest, and you have filed all required returns.
- Short-Term Payment Plan: You owe less than $100,000 in combined tax, penalties, and interest.
- Benefits: You receive immediate notification of whether your plan is approved, and there's no paperwork or need to call. There are also often lower setup fees for online applications.
- How to Use: Go to IRS.gov and search for "Online Payment Agreement." You'll typically need to create or log in to your IRS Online Account.
Sub-heading: Calling the IRS Directly
If you don't qualify for the online tool (e.g., you owe more than the OPA limits), prefer speaking to someone, or have a more complex situation, calling the IRS is the next step.
- General IRS Phone Number for Individuals: 1-800-829-1040
- General IRS Phone Number for Businesses: 1-800-829-4933
- Phone Number on Your Bill/Notice: Always check your specific IRS notice or bill, as it may have a dedicated phone number for inquiries related to that notice.
- Best Times to Call:
- Early mornings (between 8:00 AM and 10:00 AM local time) tend to have shorter wait times.
- Mid-week (Tuesday through Thursday) is generally better than Mondays or Fridays.
- Avoid calling on federal holidays or immediately after a major tax deadline (like April 15th).
- What to Expect: Be prepared for potentially long wait times. Have all your gathered information and documents readily accessible.
Sub-heading: Applying by Mail
You can also apply for an installment agreement by mail using Form 9465, Installment Agreement Request.
- When to Use: This is an option if you prefer not to use the online tool or call. It's often used when filing your tax return and you know you can't pay the full amount.
- Process:
- Complete Form 9465.
- If required by the instructions (especially for higher balances), you might also need to attach Form 433-F, Collection Information Statement.
- Mail the completed forms to the IRS address specified in the instructions.
- Drawbacks: This is the slowest method and doesn't provide immediate approval. The IRS typically responds within 30 days.
Step 3: Making the Call (If Applicable)
Alright, you've done your homework. Now it's time to connect with the IRS. This step focuses on what to do if you're calling them.
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Sub-heading: Be Prepared and Patient
- Find a Quiet Place: Ensure you're in an environment where you can focus without distractions.
- Have Everything Handy: Your SSN/TIN, date of birth, recent tax notice, and your financial breakdown (income, expenses, assets, debts) should be right in front of you.
- Pen and Paper: Crucially, have a pen and paper ready to take notes. Jot down the representative's name, employee ID number, the date and time of your call, and any important information or instructions they provide.
- Patience is a Virtue: The IRS phone lines can be very busy. Expect to be on hold for a while. Use this time to mentally review your financial details.
Sub-heading: What to Say and How to Communicate
- Clearly State Your Purpose: When you reach a representative, clearly state that you are calling to inquire about a payment plan because you cannot pay your tax liability in full.
- Be Honest and Transparent: It is vital to be completely honest about your financial situation. Do not try to hide assets or inflate expenses. The IRS has extensive data and can verify information. Misrepresenting your financial situation can lead to serious consequences.
- Explain Your Hardship (If Applicable): If your inability to pay is due to a specific event (job loss, medical emergency, natural disaster), briefly and clearly explain the circumstances. This can help the representative understand your situation better.
- Propose a Realistic Payment Amount: Based on your financial assessment in Step 1, be ready to propose a monthly payment amount that you realistically can afford. The IRS will work with you to determine an appropriate payment that balances your ability to pay with the amount owed.
- Ask Questions: Don't hesitate to ask questions if something isn't clear.
- "What are the exact terms of this payment plan?"
- "What is the total amount, including penalties and interest, that I will pay under this plan?"
- "What happens if I miss a payment?"
- "Can I make extra payments without penalty?"
- "What documentation do I need to provide, and how should I send it?"
- Confirm Next Steps: Before ending the call, always confirm the next steps. What will the IRS send you? What do you need to send them? What are the deadlines?
Sub-heading: What if They Ask for Form 433-F (or other forms)?
If your balance is higher or your situation is more complex, the IRS representative might ask you to submit Form 433-F, Collection Information Statement, or other detailed financial forms (like Form 433-A (OIC) or 433-B (OIC) for an Offer in Compromise).
- Understanding the Forms: These forms require detailed information about your income, expenses, assets, and liabilities. They help the IRS determine your "reasonable collection potential" – essentially, how much they can reasonably expect you to pay.
- Completing the Forms: Take your time, be accurate, and attach any requested supporting documentation (pay stubs, bank statements, etc.). Incomplete forms will delay the process.
- Where to Send: The IRS representative will provide the correct mailing address for these forms.
Step 4: Setting Up Your Payment Plan and Staying Compliant
Congratulations! You've navigated the application process. Now, it's about formalizing the agreement and ensuring you stay on track.
QuickTip: Revisit key lines for better recall.
Sub-heading: Formalizing the Agreement
- Online Application: If you applied online and were approved, you'll receive immediate confirmation.
- Phone/Mail Application: If you applied by phone or mail, the IRS will send you a written confirmation of your approved payment plan. This notice will outline the terms, including your monthly payment amount, due date, and the total amount you are expected to pay. Review this document carefully.
- Initial Payment: Depending on the type of plan, an initial payment may be required at the time of agreement or with your first scheduled payment.
Sub-heading: Making Your Payments
- Direct Debit (Recommended): The IRS strongly encourages Direct Debit Installment Agreements (DDIA). This automatically withdraws your monthly payment from your bank account, reducing the risk of missed payments and often carrying lower setup fees.
- IRS Direct Pay: You can pay directly from your checking or savings account on IRS.gov.
- Electronic Federal Tax Payment System (EFTPS): A free service from the Treasury Department that allows you to make federal tax payments electronically. Enrollment is required.
- Debit Card, Credit Card, or Digital Wallet: You can pay through third-party processors, but these typically involve processing fees.
- Check or Money Order: You can mail payments to the IRS, but ensure they are sent well in advance of the due date.
Sub-heading: Staying Compliant
This is critical to avoid defaulting on your agreement.
- Make Payments On Time: Always make your agreed-upon monthly payments by the due date. Missing payments can lead to default, which can trigger further collection actions like liens or levies.
- File Future Tax Returns On Time: You must continue to file all your federal tax returns on time, even if you anticipate owing more tax.
- Pay Future Taxes On Time: Any new tax liabilities must be paid in full by their due dates. Incurring new tax debt or failing to pay it can also cause your payment plan to default.
- Report Changes in Financial Condition: If your financial situation significantly improves or worsens, contact the IRS to discuss adjusting your payment plan. Ignoring changes can lead to issues down the road.
- Keep Records: Maintain meticulous records of all your payments and communications with the IRS.
Additional Considerations
- Penalties and Interest: Remember that penalties and interest will continue to accrue on your unpaid balance, even with a payment plan. Paying off your debt as quickly as possible will minimize these additional costs.
- Tax Liens: If you enter into a long-term installment agreement, especially for higher balances, the IRS may still file a Notice of Federal Tax Lien. This is a public notice that you owe the government money and can impact your credit score. However, satisfying the terms of your payment plan can lead to the withdrawal of the lien.
- Professional Help: If your tax situation is complex, you owe a very large amount, or you feel overwhelmed, consider seeking assistance from a qualified tax professional, such as a Certified Public Accountant (CPA), Enrolled Agent (EA), or tax attorney. They can help you navigate the process, understand your options, and advocate on your behalf.
10 Related FAQ Questions
How to calculate my estimated monthly payment for an IRS installment agreement?
You can use the IRS's Online Payment Agreement tool to get an estimate. Generally, for a long-term installment agreement, the IRS aims for payments that pay off the balance within 72 months, so dividing your total debt by 72 is a rough starting point, but your actual payment will be based on your income and allowable expenses.
How to apply for an IRS payment plan online?
Go to IRS.gov, search for "Online Payment Agreement," and follow the prompts to create or log in to your IRS Online Account. You'll need your tax information and financial details to complete the application.
How to change an existing IRS payment plan?
You can often change your monthly payment amount, due date, or convert to a Direct Debit agreement through your IRS Online Account. If you cannot do it online, you can call the IRS at 1-800-829-1040 (individual) or 1-800-829-4933 (business).
How to avoid penalties and interest with an IRS payment plan?
While a payment plan helps manage the debt, penalties and interest will still accrue. To minimize them, pay as much as you can upfront, choose the shortest payment term possible, and make extra payments whenever feasible.
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How to qualify for an IRS Offer in Compromise (OIC)?
You generally qualify if you can prove that paying your full tax liability would cause financial hardship, and the amount you offer represents the most the IRS can expect to collect. You must have filed all required tax returns and not be in bankruptcy. Use the IRS OIC Pre-Qualifier tool on IRS.gov to check eligibility.
How to get an IRS setup fee waived or reduced for a payment plan?
If you are a low-income taxpayer, you may qualify for a waiver or reimbursement of the installment agreement setup fee. The IRS guidelines for low-income taxpayers are based on income thresholds relative to poverty levels. You will typically indicate your low-income status during the application process.
How to reinstate a defaulted IRS payment plan?
If your payment plan defaults, contact the IRS immediately. You may be able to reinstate it by bringing your payments current, filing any missing returns, or negotiating new terms. Reinstatement fees may apply.
How to know if the IRS has accepted my payment plan application?
If you apply online, you'll get immediate notification. If you apply by phone or mail, the IRS will send you a written notice of approval or denial, usually within 30 days.
How to pay off my IRS debt faster than my payment plan allows?
You can always make larger payments or additional payments at any time without penalty. This will reduce your overall interest and penalties. You can do this through IRS Direct Pay, EFTPS, or by mail.
How to get help if I'm struggling with a very large IRS tax debt?
For complex or very large tax debts, it's highly advisable to consult a tax professional such as a CPA, Enrolled Agent, or tax attorney. They can help you understand all available options, including offers in compromise, and represent you in communications with the IRS.
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