When tax debts rack up, keeping your head above water can be tough. The IRS Simple Payment Plan offers a straightforward solution for people with $50,000 or less in taxes, penalties, and interest. The plan allows you to make monthly payments, sometimes for up to 10 years, without requiring extensive financial paperwork.
At Wiggam Law, we help taxpayers implement these plans quickly and without hassle. We’ve worked with many clients to set up affordable payments, prevent the IRS from taking harsher action, and move toward paying off their debt without added stress. If you’re not sure where to start, contact us now for expert guidance.
Key Takeaways
- The IRS Simple Payment Plan is available for individuals who owe $50,000 or less in back taxes, penalties, and interest.
- You can make monthly payments for up to 10 years without submitting financial documents.
- Approval is usually instant when you apply online and meet the requirements.
- Interest and penalties do keep adding up while you’re in the plan, so paying extra can save money.
- Missing payments can cause the plan to default, so make sure you stay consistent.
Who Should Apply for a Simple Payment Plan?
First up, let’s talk about who this plan helps. The Simple Payment Plan is suited to US taxpayers who need a little breathing room to pay what they owe while avoiding harsher collection tactics.
The plan can be beneficial for the following:
- People who can’t pay in full and want to avoid IRS enforcement. If you can’t cover your entire balance right now, the Simple Payment Plan can give you breathing room while keeping the IRS from taking steps like levies, liens, or garnishments.
- Self-employed people who are behind on taxes but are still earning income. Many self-employed people fall behind when estimated payments don’t get made on time. This plan allows you to make steady monthly payments while continuing to work and earn.
- People who expect to owe again next year and want to stay ahead. If you know your tax situation won’t be a one-time problem, setting up this plan can help you avoid falling into collections and give you a structure for paying both old and new balances.
- Anyone who needs more than a few months to catch up on taxes. If you need a little extra time, the IRS gives you up to 180 days to pay up to $100,000. If you need longer than that, the Simple Payment Plan lets you stretch payments out, so you can catch up without putting your finances at risk.
If you fall into one of those categories, the IRS Simple Payment Plan may be an option. It’s worth checking whether you qualify.
Do You Qualify for the Plan?
To qualify for the IRS Simple Payment Plan, you need to meet the following criteria:
- You must owe $50,000 or less in income tax, interest, and penalties.
- You need to have filed all required tax returns for the past six years.
- You should be current on your quarterly estimated payments (if applicable).
- You must not have recently defaulted on an IRS installment agreement.
If you don’t meet the above criteria, there are alternatives. Later in this guide, we cover other ways you can start to repay the tax you owe.
How the IRS Simple Payment Plan Works
The Simple Payment Plan is one of the easiest agreements the IRS offers. If you’re concerned about whether you can pay taxes owed, the plan could be the answer you’ve been seeking.
Monthly payments (for up to 10 years)
When you’re approved for this plan, the IRS will spread your balance out over a long period, sometimes as much as 10 years. You can take up to the collection statute expiration date to make payments, and that’s generally 10 years after assessment. So, if you’re applying for payments right away, you may get the full 10 years, but if you’re applying two years after assessment, you may only get eight years to pay.
No financial paperwork required
Unlike other IRS agreements, you don’t have to submit any bank statements, pay stubs, or expense lists to be approved. So long as you owe $50,000 or less and meet the other requirements, you can skip the financial disclosure step.
Change or cancel the plan if needed.
Changes happen. If your financial situation improves or worsens, you can request to adjust your payments without starting from scratch. You can also apply for other relief options, like an offer in compromise or currently not collectible status.
Multiple ways to make payments
Direct debit is the most convenient payment method and helps to avoid missed payments. However, you can also pay online, by check, or through the IRS’s Electronic Federal Tax Payment System (EFTPS).
How to Apply for the Plan
If you’re considering applying to the IRS Simple Payment Plan, there are two options. Let’s break down each process:
Apply online through your IRS account
This is the fastest method. Simply log in to your IRS Online Account using your ID.me verification. As long as you meet the requirements, the online application can be approved on the spot. You avoid delays and can get your plan in place immediately.
Apply by phone, mail, or in person.
If you’d rather not use the online system, you can submit IRS Form 9465 by mail, call the IRS with the info from the form, or apply in person at a local office. Note: This route may take longer for the IRS to process.
Work with a tax professional.
You can also have a tax professional apply for the Simple Payment plan on your behalf. They can take care of every step of the process and also let you know if it’s the best move in your situation.
Understanding the Plan and the Fees
Before you request this payment plan, take the time to understand how it works, what it costs, and what you can expect.
Setup Fees
The IRS charges a fee to set up the Simple Payment Plan, but how much you pay depends on how you apply and how you make your payments.
The lowest cost is $22, which you’ll get if you apply online and set up direct debit. If you apply by phone or mail, or choose to make manual payments instead of automatic withdrawals, the fee will be higher. If your income is low, you might qualify for a reduced fee or even have it waived entirely.
Payment Options
The plan allows you to pay your owed tax as monthly payments. There are two payment options:
- Direct debit. This is the recommended option. Your payments come out automatically each month, which reduces the risk of missing one.
- Manual payments. You can also pay through IRS Direct Pay, EFTPS, or by mailing a check. However, make sure you keep up with these, or you could face further action. The IRS doesn’t send out monthly reminders.
Choose whichever payment option works for you. You can switch methods anytime. Simply update either your payment method or bank account online as you need.
What to Expect Once You’re Approved
Getting approved for the IRS Simple Payment Plan can take a lot of pressure off, but there are a few important things to keep in mind:
Interest and penalties keep adding up
Even with the plan in place, the IRS will continue to charge interest and penalties on the unpaid balance until you’ve fully paid it off. Paying extra when you can afford to reduces the total cost.
Lower chance of a tax lien if you act early
Setting up the plan before the IRS takes stronger action means they generally won’t file a tax lien. Act fast if you want to protect your credit and prevent extra complications.
Yearly statements instead of monthly reminders
The IRS won’t send you a bill every month. Instead, you get an annual statement that shows your remaining balance, interest, and any applicable penalties. It’s your job to stay on track with your payments.
You must stay compliant going forward.
It is essential to file all future tax returns on time and pay any new taxes that are owed. Falling behind again could cause your plan to default and put you right back in the collection process.
What Happens If You Miss a Payment
Concerned that you may miss a payment? While this doesn’t automatically end the agreement, it does set off a process you’ll want to avoid. Here’s what happens next:
- The IRS sends a warning notice. If you miss a payment, the IRS issues a CP523 notice letting you know your agreement is in danger of default. The letter explains what went wrong and what you need to do to fix it.
- You usually get one chance to catch up. Most of the time, you’ll have an opportunity to make the missed payment and get back on track before the plan is terminated. Remember, acting quickly here is key to keeping your agreement intact.
To avoid jeopardizing your IRS Simple Payment Plan, it’s wise to stay up to date on payments. If your plan does default, you can request reinstatement, but it’s not automatic. You’ll need to contact the IRS, provide updated information, and sometimes pay additional fees.
What if You Don’t Qualify for the Plan?
If you don’t meet the requirements for the IRS Simple Payment Plan, there are still other ways to deal with your tax debt, including other types of installment agreements:
Short-term payment plan
If you can pay off the balance within 180 days, the IRS has a short-term option. Choosing this can help to avoid some setup fees and paperwork.
Non-streamlined installment agreement
If you owe more than $50,000, you may be eligible for a non-streamlined agreement, but you’ll need to provide the IRS with detailed financial information to qualify. Note that the IRS sometimes accepts these agreements without a financial disclosure if you owe less than $250,000 and a revenue officer hasn’t been assigned to your account. The IRS will generally file a Federal Tax Lien if you pursue a non-streamlined Installment Agreement.
Payment plans for business taxes
If you’re a sole proprietorship with no employees, you can apply for a payment plan as if you’re an individual. Otherwise, you’ll need to apply a plan that’s specifically for business taxes. The streamlined payment plan gives in-operation businesses up to six years to pay up to $25,000 in non-payroll tax debt.
If you’re no longer in operation, you can take up to six years to pay up to $25,000 in payroll or other business tax debt (up to $50,000 for sole props). There’s also an express installment agreement available for in-operation businesses that owe less than $25,000 in payroll tax debt and can pay it off within two years.
Businesses that don’t qualify for those options may be able to get monthly payments, but they’ll need to submit extensive financial information to the IRS.
Offer in compromise or partial payment plan.
When you can’t pay the full amount, you may be able to settle for less through an offer in compromise or make reduced payments through a partial payment agreement.
Currently Not Collectible status
If you’re in serious financial hardship, the IRS may pause collection efforts temporarily. This is known as the Currently Not Collectible status. Interest and penalties will still accrue, but you won’t have to make payments until your situation improves. The IRS will generally file a Federal Tax Lien in conjunction with accepting a request for Currently Not Collectible status.
Tips for Maximizing the Plan’s Benefits
If you’re approved for the IRS Simple Payment Plan, it’s smart to maximize its benefits.
Follow our expert tips below to get the most out of it:
- Overpay (when possible). This will reduce the interest and, therefore, the total cost.
- Request penalty abatement. This can help reduce your balance due, and potentially even bring you under the $50,000 threshold if you’re close.
- Be proactive if you incur new tax debt. The IRS may let you add balances to the existing plan if you’re still under the 50k limit, but you need to be proactive.
- Contact a qualified Tax Attorney. Experts can guide you through the process.
IRS Simple Payment Plan Frequently Asked Questions
Do I have to use the full 10 years?
No, you don’t. In fact, paying off your debt earlier can save you money on interest and penalties.
Will the IRS file a lien against me?
If you set up the plan and stick to your payments, the IRS generally won’t file a lien against you, but you need to act quickly. If the IRS files a tax lien before you set up payments, they’ll generally only remove the lien if you owe less than $25,000 and can pay it off within five years.
What if I owe under $10,000 — is this still the best option?
If you can pay off your balance due within three years, you may want to consider a Guaranteed Installment Agreement. However, if you prefer a longer term, the Simple Payment Plan remains the best option.
Can I include other types of taxes in this plan?
The IRS Simple Payment Plan is for individual income taxes. Other tax debts, like payroll or other business taxes, have different payment options.
How soon can I apply after filing my return?
You can apply as soon as the IRS processes your return and you have received notice of how much you owe. In some cases, your tax preparer or your tax prep software may be able to help you apply for a payment plan at the same time as you submit your tax return.
What if I get behind again during the plan?
Falling behind on new taxes or missing payments can cause the plan to default. While the IRS may let you reinstate it, it will take extra steps and possibly more fees. You could also be at risk of a Notice of Federal Tax Lien if your installment agreement defaults.
Talk to Wiggam Law Now
If you owe the IRS and need a payment plan, you don’t have to figure it out alone. At Wiggam Law, we help clients qualify for the right plan, deal with the IRS directly, and work toward a solution that fits their budget. Call us at (404) 233-9800 or schedule your consultation today.
