You Owe Money. What to do?
You owe money. What to do?
You can pay now via debit or check.You can use your credit card although I highly recommend against it because of the credit card fees.
If you can pay within 120 days of filing, you can avoid any additional IRS fees by using the IRS Online Payment Agreement (OPA) at www.irs.gov/OPA. Or call after your return has been filed 800‐829‐1040 (no non 800# available and you should expect long wait times). Fees for these plans established online are $10.
You cannot pay within 120 days so …
If your balance due is not more than $10,000, it can be a “Guaranteed installment agreement.” There are additional conditions (which apply for most agreements, even over $10,000):
- During the past 5 years you (and your spouse, if joint) have timely filed all returns, paid any
- taxes due, and have not entered into an agreement for the payment of tax. (This is the law, but I have yet to hear of a client who has been turned down even if in a current plan.)
- You agree to pay the full amount within 3 years (when less than $10,000)
- You are financially unable to pay the liability in full when due. (This is not defined.)
Again, you can complete the application online at www.irs.gov/OPA and the fee is $31 for direct debit from your checking account and $149 if you are going to mail in a check each month.
For amounts more than $10,000, the agreement, although it is then not a “guaranteed” agreement, and again, I have never had a client denied the installment plan, is still available. For any balances due that are less than $50,000, again, you can complete the application online at www.irs.gov/OPA. If you allow direct debit from your checking account, the fee is $31. If you are going to mail in a check, the fee is $149. Simple. And you can stretch out the payment for up to 72 months (but remember that according to the rules, once you enter into your first agreement, you are not supposed to be applying for another agreement within 6 years … that’s a long time and who knows what the future may bring you).
If you do not want to use the online application, or owe more than $50,000, I can complete a Form 9465 Installment Agreement Request to be submitted with your return (I do charge an additional fee for this). In that case, because you did not use the IRS website (and not because I am preparing it) the IRS User fee for direct debit is $107 and if you want to send in a check, $225.
Over $50,000, you can still get into an installment agreement. But there is substantially more
information which must be provided like any normal loan agreement. If you are in that situation, I will review with you what is needed to prepare the application.
The installment agreement includes interest at relatively low rates from 3‐7% or so, fluctuating quarterly with the market. Additionally, a late payment penalty is included because your tax was due on the original due date. It is advantageous to pay as much as you can as fast as you can to minimize interest and penalties.
You can payoff the agreement at any time. There are fees if you want to modify the terms of the
THIS AGREEMENT IS NOT REPORTED TO ANY CREDIT REPORTING AGENCIES. However, if you do not make payments, IRS has the right to turn over your account for collection purposes (whether you have an installment agreement or not).
So, you do want an installment plan (after reading about it):
If you want an automatic installment payment plan, you must provide me with the following
- A US phone number (they will not unless you are delinquent)
- Best time to call (they will not unless you are delinquent)
- How much is being paid with the return itself (if anything)
- How much you are going to pay each month (I suggest a minimum of $50 per month)
- Day of the month for the payment (1st‐28th only)
- Banking information for direct debit (I strongly recommend) with at least one taxpayer’s name on the account (no business accounts)
- Bank name
- ABA (Routing) number
- Account number
IRS will process the installment agreement request and get back to you in writing. Do not be surprised if you do not hear from the for 60 days or so.
Don’t worry. They haven’t forgotten about you.