How Do I Set up an IRS Payment Plan?

Geri Terzo

Owing the government money can be overwhelming to an individual who does not have the resources to satisfy that debt. In the U.S., the Internal Revenue Service (IRS), which is a U.S. federal tax agency, does have some flexibility that it may choose to extend to debtors. For instance, a debt that is incurred over a year or more may be repaid in installments in many cases. In order to establish an IRS payment plan, a taxpayer might prefer to have a personal accountant to assist or should simply remain communicative with the agency to set up terms and expectations that are both realistic and satisfying to the creditor.

The Internal Revenue Service logo.
The Internal Revenue Service logo.

Prior to making an IRS payment plan, it is helpful to become committed to honoring that agreement. The tax agency is often willing to accommodate reasonable terms but in exchange expects payments to be made on time. In the event that some unexpected circumstance occurs, an individual should remain in communication with the IRS so that the agency is aware of the problem.

If a debtor is routinely late or misses payments altogether, it will cost the taxpayer more money and time than necessary. The creditor might ask for the full payment and offer severe consequences if an individual is not forthcoming throughout the debt repayment process. An IRS payment plan can be reinstated once payments are missed but not without additional fees being charged to the individual.

Depending on the size of the tax obligation, a debtor may be able to apply for an IRS payment plan on the Internet. The IRS has an application form on its website. To begin the process, an individual may choose to call the agency or send in the application via traditional mail after printing the document from the Internet. A taxpayer has some influence over the terms of the IRS payment plan based on factors such as personal income and filing status. Those terms must remain agreeable to the tax agency, however.

Once a repayment plan has formally been established, the taxpayer can expect to receive monthly vouchers by which payments can routinely be made for the life of the debt. The IRS expects taxpayers to continue to file yearly taxes even as former taxes are being repaid. A personal accountant who helps the taxpayer file each year should be involved or at least aware of any former IRS debt that is being repaid. This professional can offer personal advice on repaying the debt but also needs to know in order to inform a taxpayer of how any future reimbursements due the taxpayer may be handled by the IRS until past debts are paid in full.

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