If you owe taxes to the IRS, and do not have the cash available to pay it, then then this article is for you. The easiest and fastest way to apply is online through your IRS ID.me account. This guide will walk you through the process step-by-step.
Why Set Up an IRS Payment Plan Online?
If you owe federal income taxes, the IRS lets you pay over time through an installment agreement — also known as a payment plan.
A payment plan does not waive failure-to-pay penalties or interest — those will continue to accrue as you make payments. Because of this, paying off your full balance as soon as possible is usually the better option.
However, not everyone has the cash flow available to pay in full. Setting up a payment plan can give you breathing room and will prevent the IRS from taking collection actions against you or your property.
Create an ID.me Account
In order to set up an IRS Payment Plan Online, you will need to create an ID.me account, if you do not have one already. You will need a Photo ID (such as a driver’s license or passport) and an internet connection to set one up.
You can create your account by following the instructions here.
Once your account is set up, you can apply for a payment plan online without having to mail anything, call the IRS, or visit an office. It’s by far the easiest way to get it done.
Who Qualifies?
You can set up a long-term payment plan online if you owe $50,000 or less in combined taxes, penalties, and interest. You must have filed all required tax returns before applying for the plan.
You can set up a short-term payment plan online if you owe $100,000 or less.
If you owe more than the applicable threshold or haven’t filed all your returns, you’ll need to work directly with the IRS to request a payment arrangement. If you are just barely over the threshold, it may be worth paying down your balance just enough to permit you to set up your payment plan.
Two Types of IRS Payment Plans
Short-Term Payment Plan (100 days or less)
A Short-Term Payment Plan gives you up to 100 days to pay off your tax balance. It’s ideal for people who just need a little more time to pull the funds together. There’s no set-up fee for this option, which makes it a great short-term solution.
Keep in mind that interest and penalties will still accrue while you’re paying. The sooner you can pay it off, the better. The good news is, there’s no penalty for paying it off early.
Long-Term Payment Plan (more than 100 days)
A Long-Term Payment Plan is designed for those who need more than 100 days to pay off their taxes. This option comes with a $22 set-up fee if you apply online. However, that fee may be waived if your income is at or below 250% of the federal poverty level, which can make this plan more accessible for lower-income taxpayers.
Just like with the short-term plan, interest and penalties will continue to build up until the balance is fully paid off.
How to Set Up Your Payment Plan Online
Step 1. Log in to your ID.me account
Visit here and click “Sign in to your online account.“
From there, log in to your ID.me account. This will take you to your Account Home.
Step 2. Go to Payments > Payment Options
Step 3. Select “Create a Payment Plan”
Step 4. Fill Out Online Payment Agreement
From here, it is a straightforward process of filling out the IRS’s online form for setting up a payment plan. The IRS will direct you through the rest of the process.
You’ll choose either short-term (up to 100 days) or long-term (more than 100 days). The system will tell you what you’re eligible for based on your balance.
You’ll set up your monthly payment amount, your bank info (for direct debit), and the date you want the payment to come out.
Step 5. Review and Submit
Double-check everything and click submit. You’ll get confirmation right away.
That’s It!
Once your plan is set up, all you have to do is make your monthly payments on time. You can even log back into your IRS account any time to view your payment history or make changes.
If you’re not sure how much you owe or what kind of plan is best for you, a tax professional can help walk you through your options.
Need Extra Help?
If you’re overwhelmed, we’re here for you. At [Your Firm Name], we help taxpayers like you navigate IRS payment plans every day. Feel free to reach out if you’d like a second set of eyes on your situation!
