Can I Ask to Make Installment Payments on Taxes Owed?

Yes. If you cannot pay the full amount of federal income tax that you owe, you may ask to make equal monthly installment payments for up to 60 months. You MUST have filed all required federal tax returns before asking for an installment payment plan.

The IRS does charge a user fee to setup an installment payment plan. The fee for a new payment plan is $105. If you choose to pay by direct debit, it is reduced to $52. If your income is below a certain level, it is $43. The user fee to restructure an existing installment payment agreement or to reinstate a defaulted installment payment agreement is $45.

Do NOT delay filing your tax return because you are unable to pay in full. If your tax return is filed late, you may have to pay a "failure to file" penalty, in addition to a "failure to pay" penalty, and interest. You should pay as much as you can with the tax return, to lower interest and penalty charges. Remember, penalties and interest will be added to the balance you owe even if an installment agreement is approved.

Future Tax Refunds

As a condition of an installment agreement, any tax refund due in a future year will be applied against the amount owed. Therefore, you may not get all of your refund if you owe certain past-due amounts, such as federal tax, state tax, a student loan, or child support. The IRS will automatically apply the refund to the taxes owed.  If the refund does not take care of the tax debt, then the installment agreement continues until all of the terms are met.

Timely Installment Payments

Throughout the term of an installment agreement, payments must be made on time. If payments cannot be made due to a change in financial condition, you should contact the IRS immediately. Failure to make timely payments could default the agreement. A defaulted installment agreement could subject your account to enforced collection action and potentially have a negative effect on your credit standing.

Restructuring an Existing Installment Agreement

If you already have an installment agreement from a previous amount owed, you may request a restructuring of your existing installment agreement. All of the amounts owed could be included in one installment agreement. Additionally, a "Collection Information Statement" may have to be completed to further illustrate your financial situation.

When NOT to Request an Installment Agreement

Do NOT request an installment payment plan if you are in bankruptcy or the IRS has accepted your Offer-in-Compromise (OIC)!

Annual Statement of Taxes Due

In accordance with the law, if you are in an installment agreement you will receive an annual statement from the IRS. The statement provides the amount owed at the beginning of the statement period, the payments (credits) posted to account(s), any fees or assessments, and the ending balance.

Collection Period

Generally the Internal Revenue Service has 10 years from the assessment of a tax liability to collect the liability. The date by which the liability must be collected is called the Collection Statute Expiration Date (CSED).

Alternatives to an Installment Payment Plan

Before requesting an installment payment plan, you should consider other alternatives such as:

• Bank Loans

• Credit Cards

• Short-Term Extension to Pay From 30 to 120 Days

Click here to return to "Frequently Asked Tax Questions"