Tax Dictionary – Payment Plan

IRS Definition

A payment plan is an agreement with the IRS to pay the taxes you owe within an extended timeframe. You should request a payment plan if you believe you will be able to pay your taxes in full within the extended time frame.

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If you are unable to pay your balance due by the tax return due date, you can request a payment plan (installment agreement). You can file Form 9465, Installment Agreement Request with your tax return or, if your return has already been filed, you can send Form 9465 on its own. If you owe less than $50,000 and can pay your balance due in full within six years, you will not be required to provide financial information to the IRS. However, if you owe over $25,000, you will be required to set up a direct debit installment agreement to avoid the IRS filing a notice of federal tax lien, which will negatively affect your credit score.

You can also request a payment plan by using the IRS Online Payment Agreement tool. By applying online, you will qualify for a lower user fee. The lowest user fee is $31 for a direct debit installment agreement requested through the Online Payment Agreement tool. The fee for applying with a Form 9465 is $225 with payment by check and $107 with payment by direct debit from your checking account.

Learn about your options to address an unpaid tax bill.

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