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IRS Installment: Setting Up a Payment Plan In 2024

Get familiar with the IRS installment payment plan available in 2024. It is the same with IRS procedures nationwide. Here’s a tutorial on how to set up an installment plan if you owe back taxes:

Determine Eligibility for an IRS Installment Arrangement

  • Amount Owed: If the total amount of your outstanding taxes, penalties, and interest is $50,000 or less, you qualify for an installment arrangement. This applies to submitted tax returns. The threshold for enterprises is $25,000.
  • File All Returns: Make sure all of the tax returns have been filed. The IRS rejects installment agreements due to unfiled returns.

Choose the Right Payment Plan

  • Short-Term Payment Plan: If you can pay your tax bill in 120 days or less, you are eligible for a short-term payment plan. There is no set-up cost. Interest and penalties will accrue until the balance is paid.
  • Long-Term Payment Plan (Installment Agreement): If you need more than 120 days, you can choose a long-term payment plan. Payments can be made monthly. Setup fees apply.

Apply for the IRS Installment Payment Plan

Apply online, by phone, by mail, or in person:

Online Application

  • Visit the IRS Website: The IRS Online Payment Agreement tool is available on the IRS website. This is the quickest and easiest way to apply.
  • Provide Information: Provide your filing status, tax balance, and personal identification information.
  • Agree to Terms: Review and agree to the terms of the installment plan, which include setup fees and recurring interest and penalties.

Phone Application

  • Call the IRS: Apply by calling the IRS at 1-800-829-1040. Expect long wait times during peak tax seasons.
  • Provide Details: Prepare your most recent tax return and payment history.

Mail Application

  • Complete Form 9465: Fill out the “Installment Agreement Request.” Attach this form to your tax return. Submit it separately if you’ve already filed your return.
  • Mail the Form: Mail the accomplished form to the address specified on the form’s instructions. Keep a duplicate for your own records.

In-Person Application

  • Visit an IRS Office: Apply in person at your nearest IRS office. Call the IRS to make an appointment. Bring all tax returns and identification.

Understand the Fees and Costs

  • Setup Fees: Fees vary based on how you choose to pay for a long-term payment plan.
    • Direct Debit (Automatic Payments): Online fee is $31 and $107 if applying by phone, mail, or in-person.
    • Non-Direct Debit: Online setup fee is $130; $225 if applying by phone, mail, or in-person.
    • Low-Income: Apply for a reduced setup fee or have the fee waived for low-income applicants.
  • Interest and Penalties: Interest and penalties accrue on the unpaid debt.

Make Your Payments

  • Monthly Payments: Use direct debit (recommended), payroll deduction, or by check, money order, or credit card for your monthly payments.
  • Stay Current: Monitor your payments to ensure they are processed correctly.
  • Modify or Revise: Contact the IRS to modify your payment plan.

Consequences of Default

  • Failure to Pay: Missed payments may result to the termination of installment agreement.
  • Enforcement Actions: The IRS may resume collection efforts if you default on your payment plan. It includes liens and levies.

Setting up an installment payment plan with the IRS in Arizona will help you manage your tax burden and avoid additional fines or enforcement actions.

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