|Tax Topic #202
||2008 Tax Year
Topic 202 - Tax Payment Options
There are various options for payment of an outstanding federal income
tax liability. Since your balance is subject to interest and a monthly late
payment penalty, it is in your best interest to pay in full as soon as you
can to minimize the additional charges. Penalties are also assessed for failure
to file a tax return so you must file even if you cannot pay your balance
You may pay your tax liability by sending a check or money order, made
out to "United States Treasury". You may pay by transferring money electronically
from your bank account. Go to www.irs.gov to find out how to make an electronic
payment. You may also pay by credit card by calling 800–272–9829
or 888–729–1040. A convenience fee paid to a service provider,
not the IRS, will be charged for electronic payments from your bank account
or for a payment by credit card. If you cannot pay in full you may pay any
lesser amount you are able to. Please see Topic 158 for information
to include to ensure that your payment is credited properly.
You should consider financing the full payment of your tax liability through
loans, such as a home equity loan from a financial institution or a credit
card cash advance. The interest rate a bank or credit card charges and
any applicable fees are usually lower than the combination of interest and
penalties imposed by the Internal Revenue Code. If you cannot pay in full
immediately, the IRS offers short-term administrative extensions of time to
pay in full from 10 to 120 days.
agreement would allow you to make a series of monthly payments over time.
The IRS offers various options for making monthly payments such as:
- Direct Debit from your bank account
- Payroll Deduction from your employer
- Payment via check or money order
- Electronic Federal Tax Payment System (EFTPS), or
- Use credit cards to pay by phone or internet
A one-time installment agreement fee of $105 will be
charged when you enter into an installment agreement unless you choose to
pay through a Direct Debit from your bank account, in which case the fee is
$52.00. Taxpayers with income at or below 250% of the Department of Health
and Human Services poverty guidelines can apply to pay a reduced user fee
Please note: The user fee for restructuring or reinstating an established
installment agreement is $45 regardless of income levels or method of payment.
If you can pay your balance in a shorter period of time, you can request
an administrative extension of time to pay (up to 120 days). This payment
arrangement does not carry a fee.
You may also request a statutory extension of time to pay tax for up to
6 months if you show that it will cause you undue hardship to pay the tax
on the date it is due. Undue hardship means more than inconvenience. You must
show that you will have substantial financial loss if you pay your tax on
the due date. You will need to submit Form 1127 (PDF), Application
for Extension of Time for Payment of Tax, a complete statement of all
your assets and liabilities at the end of last month; and an itemized list
of money you received and spent for three months before you requested this
If you decide on entering into an installment agreement, your monthly payment
should be based on your ability to pay and should be an amount that can be
paid each month to avoid defaulting.
- To request an installment agreement, when you are filing a tax return
for which you are not able to provide full payment , you may submit Form 9465 (PDF), Installment Agreement Request,
or a written request for a payment plan, attached to the front of your return.
- To request an installment agreement after your return has been filed and
you have been billed (you received an IRS balance due notice), you can use
Payment Agreement (OPA) application or you may submit Form 9465 or
your own written request for a payment plan, attached to the front of your
return or bill. You may also request an installment agreement by calling the
toll-free number on the bill.
You will need to specify the amount you can pay and the day (1st-28th)
you wish to make your payment each month. The IRS will expect to receive the
payment ON the day you indicate so be sure to figure time
into your date for mail. The IRS will respond to your request, usually within
30 days, to advise you as to whether your request has been approved, denied
or more information is needed.
Direct debit or payroll deduction installment agreements provide an opportunity
to make timely payments automatically and reduce the possibility of default.
For a direct debit installment agreement you will need
to provide your checking account number and your bank routing number to initiate
the automated withdrawal of the payment.
You may contact the IRS by phone or in person, or you may submit Form 9465 (PDF), Installment Agreement Request,
through the mail. The form has space for you to write your checking account
number and your bank routing number. However, if you choose to do so, you
may staple a voided check to the form.
To initiate a payroll deduction installment agreement, submit Form
2159, Payroll Deduction Agreement. Form 2159 must be completed
by your employer. IRS will set up a regular installment agreement for you
and convert it to a payroll deduction agreement upon receipt of the completed
form from your employer.
For more information about installment agreements, please see www.irs.gov
and enter the keyword "installment agreement".
Responding to your IRS Notice
It is important not to ignore an IRS notice. If you do not full pay your
tax liability or make an alternative payment arrangement, the IRS is entitled
to take collection action. You may refer to Topic 201 for information
about "The Collection Process".
If you are unable to make any payment at this time, please have financial
information available (i.e., pay stubs, lease or rental agreement, mortgage
statements, car lease/loan, utilities) and call:
- Individual taxpayers may call 1-800-829-1040
- Business taxpayers may call 1-800-829-4933 to receive assistance.
You have rights and protections throughout the collection process. If you
would like some printed information on "your rights as a taxpayer," making
arrangements to pay your bill, installment agreements, and what happens when
you take no action to pay, refer to Publication 594 (PDF), The
IRS Collection Process, and Publication 1, Your Rights as a Taxpayer.
Page Last Reviewed or Updated: December 22, 2008
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