Question

I have a balance due on my return and can’t pay it. Can I set up an IRS payment plan?

Answer

To set up a tax payment plan or tax payment installment agreement is among the more costly options to pay your balance due. 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 want to request an installment agreement:

  • 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 $120 ($52 if you make your payments by direct debit). You might qualify to pay a reduced fee of $43 if your income is below a certain level.

 

 

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