At some
point in your life, you may find that you owe the IRS money come tax time. This
can often be a big shock, especially for people who are typically used to
getting refunds. It can also be a bit harrowing, especially if the money is
more than you can afford to pay all at once.
If you find yourself in this situation, don’t run and hide. After all, you really can’t hide from the IRS, and ignoring them will only make things worse.
Instead,
consider entering into an installment agreement with the IRS. This option will
allow approved taxpayers to pay off their tax debt a little at a time, instead
of all in one lump sum.
Apply
Online
The easiest
way to apply for an installment agreement is online, via the IRS’ website. Just
make sure you have the following things handy before you start the application
process:
l A valid email address
l A cellphone number
l A bank account number
l Knowledge of your full name and
address as it appears on your return
l Knowledge of your most recent filing
status
l A Social Security number or an
Individual Tax ID number
l Knowledge of your date of birth
Most of this
information is used to verify that you are who you say you are and to set up
your online account. Once you have this account, applying for an installment
agreement is just a matter of clicking a few buttons and providing some general
information.
Alternately,
if you’d like to do things by mail, you can simply fill out Form 9465, which is
the Installment Agreement Request form, and send it to the IRS in the mail. You
are also able to call the IRS and set up an installment agreement over the
phone.
Fines and
Fees
Unfortunately,
it’s not free to enter into a payment arrangement. You’ll be charged $31 to set
up a direct debit plan online. If you don’t make direct debit payments, you’ll
be billed $140 for a new plan or $10 to revise a plan.
If you need
to change a direct debit plan, you’ll have to do it over phone, by mail, or in
person, and it will cost you $107. To set up a new plan without direct debit,
you’ll pay $225. It costs $89 to restructure or reinstate one of these
plans.
Interest
also grows as you pay off the tax debt. Thus, whenever possible, pay your tax
due in full. Only resort to this option when you absolutely have to.
For
taxpayers who really need them, installment agreements are a great thing.
However, always be sure to talk with a tax professional about all your
options for paying your tax debt.