IRS payment plans, set up the right way

Confirm your total balance, including penalties and interest, and check that every required return is filed. Those two facts decide which plan you can request. Then pick a monthly amount you can keep paying for years, not one that only looks good on the application. If a final notice like an LT11 is open, ask for the plan and protect your hearing rights at the same time. If the debt is on joint returns, both spouses are liable, so decide on the payment together.

Yes, though not always online. The IRS online payment agreement page allows individuals to apply online for a long-term plan if they owe $50,000 or less and filed all required returns. A short-term plan of 180 days or less is available online under $100,000. Above those limits, or for a business, the request goes by phone or mail with a financial statement. Blaga prepares that statement with you.

• Short-term, 180 days or less: $0 setup fee.
• Long-term with direct debit: $29 online, $107 by phone, mail or in person. Waived for low income.
• Long-term with other payment methods: $69 online, $178 by phone, mail or in person. $43 for low income, which may be reimbursed.

Those are IRS fees from its payment plans page. While you are on a plan, the failure-to-pay penalty drops to 0.25% a month for individuals who filed on time.

Generally, yes. The IRS says that while an installment agreement request is pending, it is generally prohibited from levying, with certain exceptions. That makes a plan one of the fastest ways to protect a paycheck or bank account. See also IRS levy and wage garnishment.

A plan also affects the collection clock. The IRS generally has 10 years from assessment to collect. A payment plan request suspends that clock while it is being reviewed, and a withdrawn or rejected plan, or one proposed for termination, extends it by 30 days, per the IRS collection period page. Blaga checks the dates on your transcript so you know where each year stands.

The IRS may send a CP523, its notice of intent to end your agreement and levy. The IRS CP523 page says to contact it no later than 30 days from the notice date. Reinstating after default online costs $6. New tax owed on a later return can also break a plan, so adjust your withholding or estimates.

She calls or files for you under Form 2848, proposes a payment your budget supports, and makes sure every year is included. She can also ask for penalty relief at the same time. If even a small payment isn't possible, she looks at a hardship delay or an offer in compromise instead. She also explains what happens if a month is missed, so there are no surprises later.

Usually, yes. Online, a direct debit plan costs $29 to set up, against $69 for other payment methods. Low-income taxpayers pay no setup fee with direct debit. It also takes a missed payment off the table, which is what puts most plans at risk. Just keep enough in the account on the draft date. If you run a business with uneven income, Blaga can help you pick a date that follows your cash flow. See tax planning for the year ahead.