When dealing with your IRS payment plan, you have a few options from which to choose. Mainly, they only differ with the amount you owe, plus how quickly you are able to pay. Let’s take a look at the different kinds of tax payment plans you can choose.
1. Installment Agreement
This IRS payment plan is typically used for those who owe less than $25,000. Essentially, you’re going to take a loan from the IRS to pay back your taxes. You must fill out Form 9465 to get this. But before you groan over more paperwork, relax. It’s a simple form that doesn't require very much information.
There are a few fees associated with this: namely, a small agreement fee. Also, there’s interest to think about. It varies from 5% to 10% per year. Obviously, the faster you pay it back, the less interest you accrue.
2. Partial Payment Installment Agreement
This is the more complicated version of the tax payment plan options. Not only do you have to fill out the 9465 Form, you must also fill out the 433-F Form. This form will make you report everything you own to deduct your total net worth. This includes your house, bank accounts, the works.
This is usually only needed for taxpayers who owe over $25,000. This is because the payments will be larger and also will go on for much longer, perhaps even years.
3. 120 Days
With this IRS payment plan, you have the option to finish up your tax payments within 120 days. If you can, then you can skip all the fees and interest you would normally be hit with. This is obviously the optimal tax payment plan. However, it may not be entirely possible. Maybe your taxes are too high or you are strapped for cash.
Whichever tax payment plan you choose, make sure to pay your taxes as fast as humanly possible. This means don’t try and fudge how much you can pay each month just to try and get approved. It may come back and bite you in the end!