If you owe taxes to the Internal Revenue Service (IRS) and are unable to pay the entire amount right away, do not panic. On the practical side, the IRS provides a number of solutions for taxpayers with tax debt. The Short-Term Payment Plan is one of the most accessible and straightforward options.
The IRS offers several different payment plan options, but taxpayers may want to first consider non-IRS options depending on their financial situation.
What’s a Short-Term Payment Plan?
If you can pay your tax debt in full within 180 days (about six months), you can apply for a short-term payment plan. It is great for anyone who needs just a bit longer to pay off their taxes, but who does not want to enter a long-term installment agreement.
This is an option for taxpayers owing less than a specific amount, who can pay the remainder in full during that time span.
Eligibility Requirements
Eligibility for a short-term payment plan:
- Your combined tax, penalties, and interest owed must be less than $100,000.
- The balance must be paid in full after 180 days (or 6 months).
- Must be individual (not business).
- You should be current on all necessary tax filings.
If you satisfy these requirements, the short-term payment plan is typically granted automatically on request.
How to Apply
For a short-term payment plan you can apply for through:
1. Online
Taxpayers can now apply for a payment plan online via the IRS’s Online Payment Agreement tool
- Visit www.irs.gov and search for “Online Payment Agreement,” or go directly to: irs.gov/payments/online-payment-agreement-application
- Use your ID. me or IRS username to log in.
- Confirm your identity using a government-issued photo ID and your Social Security number.
- After logging in, select “Apply for a Payment Plan” and select that plan option (up to 180 days).
- Enter the number of days (up to 180) in which you’ll need ‘to pay off your tax debt in full.
- There are multiple ways the IRS accepts payment under the short-term plan:
- Direct Pay (bank account)
- Debit/credit card
- EFTPS
- Check or money order
- Enter bank or card info, and choose when you want to be paid or the date for payment.
- Check all details, submit the application, and save or print your confirmation number for your records.
2. Phone:
Generally, taxpayers qualifying for an installment arrangement would choose that option as they qualify for the direct post payment only if they request a repayment plan with the IRS representative, who can help taxpayers set up and identify the best payment option.
- Call the IRS at 800-829-1040 (individual taxpayers).
- Have your personal and tax information in order.
3. Mail:
Taxpayers may also request a payment plan in mail by filling out and sending Form 9465, Installment Agreement Request, with any necessary paperwork and payment.
Fees & Interest
A short-term payment plan does not have an upfront setup fee like long-term installment agreements. But interest and penalties still apply to any amount you haven’t fully paid yet.
Current charges include:
- Interest rate: Typically 8% a year but can change quarterly.
- Late-payment penalty: Up to 0.5 percent monthly on unpaid taxes.
The sooner you pay off your tax debt, the less you will pay in these costs.
Benefits of a Short-Term Payment Plan
- No setup fee
- Simple application process
- Flexible payment options
- Prevents more aggressive IRS collections
- Protect your credit (IRS doesn’t report to the credit bureaus, buta lien could show up on public records.)
FAQs
1. How long can I expect to pay under a short-term plan?
You have at least 180 days (approximately six months) to pay your entire tax debt.
2. Is there a fee to apply?
No, the short-term plan has no setup fee. Interest and penalties do still accrue, though.
3. Can I apply online?
Yes, and it’s the most convenient way. CPAs can go online to use the IRS Online Payment Agreement tool.
4. Can I upgrade my short-term plan to a long-term plan?
Yes. Otherwise, if you can’t pay in 180 days, you can get a long-term installment agreement.
A short-term payment plan is an economic means of coping with unexpected tax bills when you need a few extra months to pay. If you’re sure you can pay back in 180 days quite easily, this plan will save you from incurring those extra fees and will give you added space to breathe.
IRS payment plans provide taxpayers with an organized and declarative means through which they can settle their tax liability over a longer period.