Options for Paying Taxes

Key Steps for Managing Tax Payments

1. File Your Tax Return on Time

• Individual income taxes are due in full by April 15 each year.
• Do not postpone filing if you owe taxes, even if you cannot pay immediately.
• Missing the deadline without an extension may result in late filing penalties of up to 25% of the tax due.

2. Request an Extension to File (Not to Pay)

• File Form 4868 to receive an automatic six-month extension (until October 15).
• This extension applies only to filing—not to tax payments.
• To avoid late payment penalties, pay at least 90% of your tax liability by April 15.

Strategies to Reduce Late Payment Penalties & Interest

1. Pay as Much as You Can

• Even if you cannot pay the full amount, paying a partial amount helps reduce interest and penalties.
• If you owe due to an audit or IRS notice, pay as early as possible to minimize additional charges.

2. Consider a Loan or Credit Card Payment

• A loan or credit card payment may be cheaper than IRS interest and penalties.
• Compare total cost of borrowing before choosing this option.
• Note that bank or credit card interest is generally not tax deductible.

3. Request a Short-Term Payment Extension (60-120 Days)

• Call the IRS at 800-829-1040 or
• Apply via the IRS Online Payment Agreement at www.irs.gov

Interest and penalties continue to accrue, but no installment agreement is required.

Setting Up an IRS Installment Agreement

1. Filing Form 9465 (Installment Agreement Request)

• Submit Form 9465 with your tax return or separately.
• If paying within 120 days, Form 9465 is not required—use the Online Payment Agreement instead.
• Allows up to 72 months to pay, with interest accruing but possible penalty abatement.

2. IRS Requirements Based on Amount Owed

• $10,000 or less: Auto-approved if
  • The taxpayer agrees to pay within 3 years.
  • No prior installment agreements exist.
  • Taxes were filed on time in the last five years.
  • The taxpayer agrees to comply with tax laws.
• $25,000 - $50,000:
  • Requires direct debit payments.
  • Bank account details must be provided.
• Over $50,000:

• Must attach Form 433-F (Collection Information Statement).
• IRS determines monthly payment amounts based on finances.

3. Installment Agreement Fees

Low-income taxpayers may qualify for fee waivers or reimbursements by submitting Form 13844.

Keeping Your Installment Agreement Active

• Make payments on time to avoid default.
• Stay current with all future tax filings.
• If you receive a Notice of Intent to Terminate, contact the IRS immediately.

IRS Will NOT Take Collection Actions If

• A payment plan is under review.
• A payment plan is active.
• The IRS evaluates an appeal for a rejected or terminated agreement.
• You are within 30 days of rejection or termination.

For more details, visit www.irs.gov.