Dollar payment for a plan.

I Owe the IRS Money and Need a Payment Plan

*The following article was updated in March 2024*

Tax season is upon us, and there are few things that create more stress than owing the Internal Revenue Services (IRS) money. Unfortunately for many taxpayers, owing money on taxes is a reality of life. But what happens when you owe the IRS money, but don’t have the full amount to make the payment by April 15?

While it’s always best to pay your tax burden in full and on time, there are circumstances where you may owe more than you have in your bank account. Fortunately, the IRS does have payment plans in which they will allow you to pay the taxes you owe in an extended timeframe. Here’s what you need to know about applying for a payment plan when you owe the IRS money.

The first step in the process is to apply to the IRS for a payment plan, or an installment agreement. Generally, the IRS will allow you to set up a streamlined payment plan with no lien filed under the following conditions:

  • You owe $50,000 or less
  • You demonstrate you can’t pay the amount you owe now
  • You can pay off the taxes owed in three years or less

There are essentially four payment plans available:

Short-term Payment Plan

This plan is for taxpayers who can pay off their debt in 120 days or less. There is no setup fee; however, you will need to pay any accrued penalties or interest until the balance is paid in full.

Long-term Payment Plan

This is what’s known as an installment agreement. It’s for taxpayers who need more than 120 days to pay the amount, and the payments are taken through automatic withdrawals from your checking account. There is a $31 setup fee, and you will need to pay any accrued penalties or interest until the balance is paid in full.

Streamline Payment Plan

If your balance is below $50,000 the IRS will allow you to streamline your payment plan over 72 months with no financial information provided. The IRS will also not file a lien. Unfortunately, penalties and interest still will accrue until the balance is paid in full.

Balance greater than $100,000

If your IRS balance is greater than $100,000 the IRS will require you to provide financial information including income and proof of expenses. Additionally, all expenses may not be allowed by the IRS as there are national standards and some expenses are limited by the IRS.

Owing the IRS is a scary prospect. But there are ways to lower your tax burden or possibly have penalties waived. If you find yourself in a situation where you owe the IRS, consult with an experienced attorney for advice and guidance.

Allison Soares is a partner and tax attorney at Vanst Law. It doesn’t matter the issue: audits, collections, appeals, international disclosures, grumpy people— Allison enjoys fixing tax problems. In addition to her legal work, she has worked in accounting and utilizes that knowledge to her advantage while handling cases involving the IRS and state tax problems.

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Allison Soares

Allison Soares, a renowned tax attorney, excels in representing clients before the IRS, FTB, EDD, and CDTFA. With a Bachelor of Arts in Finance from the University of Wisconsin, Milwaukee, and a transformative teaching stint in Brazil, Allison’s diverse background enriches her legal expertise. She pursued law at St. Thomas University School of Law, Miami, complementing it with an MBA in accounting and forensic accounting. Further honing her skills, she obtained a Master of Laws in Taxation from the University of San Diego School of Law. As an adjunct professor at San Diego State University, Allison imparts her knowledge in tax procedures, practice, and ethics. Her accolades include being named Best of the Bar by the San Diego Business Journal and multiple Super Lawyer recognitions. Committed to community service, she volunteers with Forever Balboa Park and Friends of Balboa Park. Allison’s authoritative contributions in tax law are showcased through her publications and speaking engagements.

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