The IRS will provide taxpayers with up to 120 days to pay their full tax balance. There is a penalty of 0.5% per month on the outstanding balance. Your specific tax situation will determine what payment options are available to you. Payment options include a full payment, a short-term payment plan (paid in 180 days or less), or a long-term payment plan (installment agreement) (monthly payment).
The IRS gives eligible taxpayers up to 72 months to fully pay their tax debt. Keep in mind that interest and penalties will continue to accrue until the balance is paid. If you're owed a refund in a later tax year while you're on the plan, the IRS can subtract those payments from what you owe. In addition, you must agree to comply with tax laws.
Nor can you have had an installment agreement with the IRS in the past five years. File all required tax returns on time and pay all taxes in full and on time (contact the IRS to change your current agreement if you are unable to do so). If the IRS approves your long-term online payment plan (installment agreement), you may be charged a setup fee based on your income. If you already have a payment plan, you may also qualify to use the online payment plan option to review your current agreement.
Otherwise, you'll need to fill out Form 9465 and mail it to your local IRS office to see what type of plan you qualify for. For information on IRS efforts to facilitate law enforcement due to COVID-19, see The IRS Facilitates Compliance Efforts During the Coronavirus Pandemic. Similarly, if you don't meet your AI payments and the IRS proposes to cancel the AI, the collection period is suspended for 30 days. To convert your current contract to a direct debit agreement or to make changes to the account associated with your existing direct debit agreement, enter your bank address and account number.
There's also a penalty for not filing a tax return, so you must file it on time, even if you can't pay the balance in full. If the IRS system identifies you as a low-income taxpayer, the online payment agreement tool will automatically reflect the applicable rate. If the IRS approves your payment plan (installment agreement), one of the following charges will be added to your tax bill. If you owe taxes and can't pay, it's a good idea to find out if you qualify for an installment plan.
You can view the details of your current payment plan (type of agreement, due dates and the amount you must pay) by logging in to the online payment agreement tool. Completing the online form can lower your user fee for paying in installments, which is the fee charged by the IRS to establish a payment plan. However, if you enter into an installment agreement with the IRS that allows for partial payment of the amount due, you may have to sign a form waiving the ten-year statute of limitations. If you received a letter from the IRS stating that you have taxes due, don't automatically assume that the IRS is correct.