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 immediately.

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.

An installment 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 of $43.

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 extension.

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 the Online 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".

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

Previous | Index | Next

Tax Topic Categories | FAQ Categories | Tax Prep Help Main | Home