In this article we will talk about everything you need to know about making IRS payments.
- How to make a one-time IRS payment
- How to get an IRS payment plan
- How to pay federal taxes online
- Options for repaying the IRS
- How to avoid a tax lien when repaying the IRS
- Where to send IRS payments
- How to make estimated tax payments
- Types of IRS installment agreements
- What to do when you can’t afford to pay the IRS
- When a Offer in Compromise is better than an IRS Installment Agreement
How to make a one-time IRS payment
If you are looking to make a one time payment to the IRS to pay off a previous year federal tax bill, these are your options:
- You can pay online or mail a payment to the IRS. Click here find out where to mail a payment with a return. If you are paying an older tax debt, find the address on your notice. If you can’t find any of your notices, call the IRS at 800-829-1040. You’ll need to give them your name, address, daytime phone number, Social Security number (the SSN shown first if it’s a joint return) or employer identification number, tax period and related tax form or notice number on your form of payment.
- You can also pay the IRS in cash at at an IRS retail partner. They will charge a fee. Also, you can, believe it or not…pay taxes at your neighborhood 7-11.
How to get an IRS payment plan
To get into a payment plan for back 1040 taxes, you need to know where your “Account” with the IRS is. Is it located with the IRS automated collection service (ACS)? Or is it out for collection in the field; that is, with a Revenue Officer? If your account is with ACS, you will have to call the IRS at 800-829-1040 (for individuals), or 800-829-4933 (for businesses), or the phone number on the latest notice to get into a repayment plan with the IRS.
If you meet certain qualifications, you may use the IRS installment agreement .
If you owe a 1040 tax liability you can apply online if you owe $50,000 or less in combined tax, penalties and interest, and have filed all required returns. You may also qualify for a short term agreement if your balance is under $100,000.
If your company owes $25,000 or less on Forms 1120, 941 or 940 in combined tax, penalties and interest for the current year or last year’s liabilities, and have filed all required returns you can apply for a business payment agreement with the IRS.
Sometimes, if you owe a substantial amount of money you may be transferred to the high dollar unit of ACS, or be sent out for field collections with a Revenue Officer. If your account is with an IRS Revenue Officer you will have to negotiate an IRS payment plan with them. Many people hire tax attorneys to do the negotiations for them, as cases assigned to a revenue officer tend to have higher stakes.
How to pay federal taxes online or electronically
Use IRS Direct Pay and avoid fees:
- Use this secure service to pay your individual tax bill, or estimated tax payment, directly from your checking or savings account at no cost to you. You’ll receive instant confirmation that your payment has been submitted. Bank account information is not retained in IRS systems after payments are made. Click here to use IRS direct pay.
Pay with a credit card or debit card. (Get miles, but you you’ll be paying processing fees!):
- If you e-file, paper file or are responding to a bill or notice you can pay by internet, phone, or mobile device. The IRS uses standard service providers and business/commercial card networks, and your information is used solely to process your payment. Click here to pay with a credit or debit card.
- Use EFPTS (Electronic Federal Tax Payment System) to pay your federal taxes. It is free to use, but you must enroll first.
- Pay taxes with your e-filing. Electronic Funds Withdrawal (EFW) is an integrated e-file/e-pay option offered only when filing your federal taxes using tax preparation software or through a tax professional. Using this payment option, you may submit one or more payment requests for direct debit from your designated bank account.
- Wire funds. Your bank will charge you a wire fee, but it’s a good option if you need to do a same-day wire from your Financial Institution. Contact your Financial Institution for availability, cost, and cut-off times.
When you can’t pay the IRS in full: Options for repaying the IRS
- Borrow money to pay the IRS (Here’s an article on what to think about before borrowing money).
- Refinance a house and use the proceeds to pay off the IRS. An advantage here is that the interest you would pay may be tax deductible.
- Get an IRS installment agreement.
- Get an IRS partial payment installment agreement.
- Do an IRS Offer in Compromise
How to avoid a tax lien when repaying the IRS
In certain instances the IRS will file a Notice of Federal Tax lien when you enter into certain types of installment agreements. The IRS says it does this to “protect their interests.” The IRS will file this lien regardless of your assets or income. Here are some ways to avoid that:
- Get into certain types of installment agreements.
- Pay down the balance so you can get into an installment agreement that will hold off a tax lien from being filed.
- Have a good reason why the IRS shouldn’t put a lien on you. You need proof that the lien will clearly hurt your earning ability, for instance if you have a securities license. The IRS denies many of these request for not being clear and convincing enough, so it is essential to hire legal help.
Note — If you default an installment agreement, when the repayment is renegotiated it will be difficult to avoid a lien being filed. That is why it is important to set up an affordable repayment plan…don’t agree to something you know you can’t afford!
Where to send IRS payments
If you are sending a payment to the IRS for current year taxes, see estimated payment below.
If you have a revenue officer assigned to your case, you should send your payments to him or her so they can log their notes.
How to make estimated tax payments
Use IRS voucher form 1040ES, and send it to the address instructed to on this page. You can also make a payment online.
Types of IRS installment agreements
There are significant advantages to entering into an IRS installment agreement when you owe back taxes. Sure, you’d probably prefer not to pay, but when you enter into an installment agreement, all collection activity (with the exception of a possible Notice of Federal Tax line being filed) stops. You wouldn’t have to worry about your wages, bank accounts, or accounts received being levied…or assets like houses and cars being seized. Also, entering into an Installment Agreement does not stop or “toll” the limited time in which the IRS has to collect the debt. Many taxpayers enter into a payment agreement, but never pay back the full amount, as the tax debt expires prior to the tax debt being paid in full.
IRS installment agreements types:
- Guaranteed low dollar (under $10,000) installment agreement
- Streamlined Personal
- Streamlined Business
- Direct Debit agreement
- 6-year Installment Agreement
- 1-year/5-year installment agreement
- Partial Payment installment agreement: This is the type of installment agreement that will let you pay less than the full debt. The tax debt will expire before you can pay the entire amount back.
What to do when you can’t afford to repay an IRS debt
Are you stuck in an affordable installment agreement? Click here for more information.
What to do when you are pretty sure you can’t afford to repay the IRS:
- Don’t agree to a repayment plan you know you can’t keep. If you default an installment agreement the IRS will become more aggressive. You can default an installment agreement in one of two ways: failing to make payments or incurring new debts.
- Don’t borrow money from someone unless you have a surefire plan that you’re sure that will work. You cannot incur any new liabilities! The IRS does not factor how much you can borrow when determining your ability to pay them. It is better to see if you can get a deal with the IRS, and then borrow money to pay off that (hopefully) lower amount.
Be aware of the settlement alternatives:
- Partial payment installment agreements
- Hardship or Currently Non-Collectible Status
- An Offer in Compromise Doubt as to Collectabilty
- Filing Chapter 7 Bankruptcy to discharge tax debts may be a possibility
When a Offer in Compromise is better than an IRS Installment Agreement
Advantages of an Offer in Compromise
- If you qualify, you will pay less.
- Once you pay the IRS Offer in Compromise amount, any federal tax liens will be automatically removed within 2 months.
- You don’t have to worry about collections while your Offer in Compromise is pending.
Disadvantages of an Offer in Compromise
- You must qualify for an Offer in Compromise.
- It can take over a year to get an Offer in Compromise accepted.
- There is a lot of confusion with Offers in Compromise…the IRS pre-qualifier tool is not accurate. Also, Offer in Compromise examiners do not always follow the IRS guidelines.
- You’ll need experienced legal help to negotiate the best deal.
- You will pay something.
- You have to submit a partial payment when submitting your offer, and even if they decline your offer, the IRS gets to keep that money! (There are ways to avoid sending this payment in).
- Many times they will decline your offer and an Offer in Compromise appeal is needed (again, it is best to have legal representation to take care of the appeals process).
- Your must be in compliance for 5 years after the Offer in Compromise is accepted, or the entire tax debt that you settled will come back.
- The IRS will intercept your refund due for the year in which your Offer in Compromise was accepted. For example, if you had an Offer in Compromise accepted in 2016, and in April of 2017 you expect a $7,000 refund, the IRS will actually take it. They will take it even if this is more than your Offer in Compromise amount!
Advantages of an Installment Agreement
- Installment agreements are usually easier to get approved than an Offer in Compromise.
- Collections usually stop while under consideration.
- Enforced collections stop while the installment agreement is being paid.
- The statute of limitations on collections runs while you are in good status.
Disadvantages of an IRS installment Agreement
- Liens may be filed.
- You must be current with this years taxes, and continue to make your installment agreement payments or you will default your installment agreement.
- Some installment agreements can last 6 years or more.
If you need assistance with anything we talked about, contact us for a consultation (your communications are confidential and subject to the attorney client privilege). Call us at 888-727-8796 or email firstname.lastname@example.org. To learn more about our services and fees, click here.