About a month has passed since you and millions of other taxpayers took a sigh of relief and filed your taxes in time for the tax deadline. Congratulations on avoiding a hefty failure-to-file penalty and getting your taxes done on time. If you owed money and requested an installment agreement when you filed your taxes, you should receive something in the mail from the IRS soon letting you know whether your request was accepted or not. The IRS usually takes about 30 days to let you know, but if you filed after March they may take a little longer to let you know.
Here are eight things you should know about installment agreements:
- If your request is approved, you will receive a notice detailing the terms of your agreement and a request of $120 ($52 if you make payment by direct debit) to set up the installment agreement.
- IRS approval allows you to pay the tax over 72 months and by filling out the request you agree to pay on time.
- Your future tax obligations have to be paid in full and all of your required tax returns have to be filed.
- If you have a refund coming in the future it will be applied to the amount you owe, but you still are required to make your monthly installment agreement.
- You are still charged interest and may be charged a late payment penalty on tax not paid in full by the due date even if your request is granted.
- You can make your installment payments by check, money order, credit card, direct debit, or payroll deduction.
- If you make a payment late or don’t pay a balance due on a tax return you file later, you will be in default of your agreement and the IRS may take enforcement actions that’s why it’s best to make payments automatically via direct debit or payroll deduction so you don’t forget.
- You may be able to restructure your payment plan if you forget to pay, but you will incur another set-up fee and you will have to wait to see if the IRS agrees to another plan.
Do you still owe and didn’t request an installment agreement? Don’t worry, it’s not too late. You can apply for an online installment agreement at IRS.gov if you owe less than $50,000, instead of filing Form 9465. When you owe, the IRS will also automatically send you your payment plan options in the mail with information on how to apply for an installment agreement. The key is to go ahead and make the request for the option that is best for you and your finances. The IRS is willing to work with you.