Yes, You Can Set Up a Payment Plan for Your Taxes

A mother and son at home looking at a computer screen.
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If you owe money on your taxes, but might not be in the best financial situation to pay them all off at once, you can apply online to set up a payment plan for your tax bill. If you are a qualified taxpayer or have power of attorney for one, you can apply for a payment plan, including an installment agreement online to pay off the balance over time.

Learn More: Need Help Paying For Your Taxes? The IRS Has Several Options For You
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Once you complete your online application, you will receive immediate notification of whether your payment plan has been approved or not.

You may qualify to apply online for either a long-term payment plan or short-term payment plan A long-term payment plan — in other words, an installment agreement — is offered if you owe $50,000 or less in combined tax, penalties and interest and you have filed all required returns. A short-term payment plan can be offered if you owe less than $100,000 in combined tax, penalties and interest.

Make Your Money Work

Your specific tax situation and how much you make versus how much you owe will determine which payment options are available to you. Short-term payment options are typically 120 days or less, with long-term options for further time periods.

More: What Is A Plus-Up Payment and How Can I Get One?

In order to apply for a payment plan, the IRS states the following in terms of what you’ll need:

  • Name exactly as it appears on your most recently filed tax return
  • Valid email address
  • Address from most recently filed tax return
  • Date of birth
  • Filing status
  • Your Social Security Number or Individual Tax ID Number (ITIN)
  • Based on the type of agreement requested, you may also need the balance due amount
  • To confirm your identity, you will need:
    • financial account number or
    • mobile phone registered in your name or
    • activation code received by postal mail (takes 5 to 10 business days)
  • If you previously registered for an Online Payment Agreement, Get Transcript, or any Identity Protection PIN (IP PIN), you should log in with the same user ID and password. You will need to confirm your identity by providing the additional information listed above if you haven’t already done so.

It’s important to note that even if you set up a payment plan, you will still accrue interest and penalties on the amount owed.

Each payment plan has its own fees, except for the short-term plan which is free of set-up fees. You will still need to pay accrued interest and penalties, though, until the full amount is paid off. The only way to avoid future penalties and interest is to fully pay off balances at once.

Read: Here’s How to Unenroll From Monthly Child Tax Credit Payments – And Why You Might Want To
Discover: Settle Your Tax Debt Using This Lesser-Known IRS Compromise Portal

Make Your Money Work

It’s also important to consider that setup fees might be higher if you apply for a payment plan over the phone, by mail or in-person, so applying online is the cheapest and fastest way to both get a decision and go through the process. If you are a sole proprietor or independent contractor, you can also apply for a payment plan as an individual.

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Last updated: July 30, 2021

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About the Author

Georgina Tzanetos is a former financial advisor who studied post-industrial capitalist structures at New York University. She has eight years of experience with concentrations in asset management, portfolio management, private client banking, and investment research. Georgina has written for Investopedia and WallStreetMojo. 
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