If you’re unable to immediately pay your taxes but believe you could within the next few months, you may be a prime candidate for an IRS payment installment agreement. Read on to learn more about the various types of agreements — and to determine which is appropriate for your situation:
Short-Term Payment Plan
Looking to avoid application fees? The short-term approach to payment is your best bet. Designed to last 120 days or less, this plan sidesteps the startup fees typical of other payment plans. To qualify, you’ll need to set up automatic payments from your checking account or by check or money order. A small fee may be assessed for balances paid by credit card. While you can avoid the application fee, you’ll still need to pay interest on the balance you owe.
Long-Term Payment Plan
The long-term payment plan provides more leeway for paying off your debt, but at a cost: $139 for the online application or $225 to apply by phone. Reduced fees are available for low-income taxpayers — and fees can be waived completely in select situations. In addition to these fees, you’ll continue paying interest on your balance. Accrued interest over the course of this plan could be significant, especially as compared to a short-term payment plan.
Direct Debit Installment Agreement
If you’re like many delinquent taxpayers, you worry about the consequences of paying late. No worries — the IRS offers an option for automatic withdrawals. This version of the aforementioned long-term payment plan provides additional incentives, including set-up fees of just $31 for online applications. Better yet, these fees are often waived for low-income taxpayers.
Still not sure which installment payment agreement is right for you? The Highland Tax Group can offer valuable insight into available options. Call 720-398-6088 today to learn more about our tax resolution services.