Question

Can I Set Up an IRS Payment Plan If I Can’t Pay My Taxes?

Answer

If you can’t pay all your taxes by the tax due date, the IRS will let you pay your taxes over time using an IRS payment plan. To do this,  you’ll have to set up an installment agreement with the IRS. However, dealing with your taxes with IRS installment payments can be more expensive than other ways you could pay. You might want to consider other less expensive options, including:

  • Pay by credit card
  • Borrow from your 401(k)
  • Take out a personal loan
  • File for a short-term extension — up to 120 days. This option has:
    • No fee
    • Penalty of 0.5% per month on unpaid balance
    • Interest of short-term federal rate plus 3% (interest might change each quarter)
  • Complete IRS Form 1127: Application for Extension of Time for Payment of Tax Due to Undue Hardship

If you still want to set up a tax payment plan with the IRS:

  • Request an installment agreement with one of these:
    • Online payment agreement (OPA)
    • Form 9465 — If your liability is more than $50,000, you’ll need to file Form 9465 instead of using the online agreement. You must agree to pay the full amount within three to five years.
  • Pay an application fee of $149. The fee might be reduced to: 
    • $31 if you make your payments by direct debit 
    • $43 if your income is below a certain level

If I Set Up an IRS Installment Agreement, Can I Change It or Stop It?

After you’ve set up your payment plan and the IRS approves it, you can request to change or end the agreement. This request won’t make the time you have to pay your taxes longer.

If you owe taxes but can’t pay, our tax pros can help you figure out which steps to take next. Make an appointment for a free consultation with a local tax professional online or by calling 855-536-6504.

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