How to get on an IRS payment plan

If you put off filing your tax return and owe the government money, you could be in hot water. You’ll not only get penalized for filing late, but you’ll also have to pay interest and penalties on the unpaid taxes you owe.

There are several IRS payment options and payment plans for you to pay your federal taxes over time if you miss the deadline. The best thing you can do is file and pay taxes on time to avoid paying stiff late penalties to the IRS.

Short-Term Tax Payment Plans

If you don’t have the money and can’t pay taxes due when you file but will be able to pay soon, you can apply for a short-term payment agreement with the IRS. Under a short-term payment agreement, the IRS can offer you an extension of up to 120 days to pay your tax debt. You will not have to pay a fee to enter into a full payment agreement, but your tax debt will accrue interest and penalties until you pay it off in full. You can apply online, by phone, by mail or in-person.

52 PHOTOS
Average tax refund in every U.S. state
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Average tax refund in every U.S. state

Texas

Average refund: $3,206

Number of refunds: 10,087,693

Total income tax refunded: $32.3 billion

Louisiana

Average refund: $3,115

Number of refunds: 1,611,412

Total income tax refunded: $5 billion

Connecticut

Average refund: $3,099

Number of refunds: 1,396,609

Total income tax refunded: $4.3 billion

Oklahoma

Average refund: $3,098

Number of refunds: 1,300,577

Total income tax refunded: $4 billion

New York

Average refund: $3,059

Number of refunds: 7,712,210

Total income tax refunded: $23.6 billion

New Jersey

Average refund: $3,013

Number of refunds: 3,479,321

Total income tax refunded: $10.5 billion

Wyoming

Average refund: $2,989

Number of refunds: 214,649

Total income tax refunded: $641.6 million

North Dakota 

Average refund: $2,983

Number of refunds: 277,422

Total income tax refunded: $827.4 million

Florida

Average refund: $2,933

Number of refunds: 7,854,538

Total income tax refunded: $23 billion

Mississippi

Average refund: $2,922

Number of refunds: 1,018,429

Total income tax refunded: $2.97 billion

California

Average refund: $2,911

Number of refunds: 13,594,703

Total income tax refunded: $39.5 billion

Washington D.C.

Average refund: $2,900

Number of refunds: 277,399

Total income tax refunded: $804.5 million

Illinois

Average refund: $2,900

Number of refunds: 4,973,653

Total income tax refunded: $14.4 billion

Maryland

Average refund: $2,861

Number of refunds: 2,329,288

Total income tax refunded: $6.7 billion

Massachusetts

Average refund: $2,850

Number of refunds: 2,704,250

Total income tax refunded: $7.7 billion

Alaska

Average refund: $2,843

Number of refunds: 276,887

Total income tax refunded: $787 million

Nevada

Average refund: $2,830

Number of refunds: 1,111,952

Total income tax refunded: $3 billion

Georgia

Average refund: $2,832

Number of refunds: 3,606,774

Total income tax refunded: $10.2 billion

Alabama

Average refund: $2,802

Number of refunds: 1,650,125

Total income tax refunded: $4.6 billion

Virginia

Average refund: $2,771

Number of refunds: 3,129,030

Total income tax refunded: $8.7 billion

Arkansas

Average refund: $2,759

Number of refunds: 989,288

Total income tax refunded: $2.7 billion

Tennessee

Average refund: $2,726

Number of refunds: 2,465,816

Total income tax refunded: $6.7 billion

Utah

Average refund: $2,681

Number of refunds: 1,033,141

Total income tax refunded: $2.8 billion

Washington

Average refund: $2,681

Number of refunds: 2,749,362

Total income tax refunded: $7.4 billion

Arizona

Average refund: $2,672

Number of refunds: 2,244,925

Total income tax refunded: $6 billion

Kansas

Average refund: $2,665

Number of refunds: 1,044,275

Total income tax refunded: $2.8 billion

New Mexico 

Average refund: $2,657

Number of refunds: 724,549

Total income tax refunded: $1.9 billion

South Dakota

Average refund: $2,651

Number of refunds: 321,372

Total income tax refunded: $852 million

West Virginia

Average refund: $2,649

Number of refunds: 649,049

Total income tax refunded: $1.7 billion

Kentucky

Average refund: $2,648

Number of refunds: 1,590,274

Total income tax refunded: $4.2 billion

Delaware

Average refund: $2,648

Number of refunds: 365,749

Total income tax refunded: $968.4 million

Rhode Island

Average refund: $2,643

Number of refunds: 436,490

Total income tax refunded: $1.1 billion

Pennsylvania

Average refund: $2,643

Number of refunds: 5,071,264

Total income tax refunded: $13.4 billion

Colorado

Average refund: $2,636

Number of refunds: 2,014,233

Total income tax refunded: $5.3 billion

North Carolina

Average refund: $2,629

Number of refunds: 3,580,471

Total income tax refunded: $9.4 billion

Nebraska

Average refund: $2,615

Number of refunds: 711,103

Total income tax refunded: $1.8 billion

Indiana

Average refund: $2,612

Number of refunds: 2,577,994

Total income tax refunded: $6.7 billion

Iowa

Average refund: $2,602

Number of refunds: 1,141,151

Total income tax refunded: $3 billion

New Hampshire

Average refund: $2,602

Number of refunds: 558,359

Total income tax refunded: $1.4 billion

Missouri

Average refund: $2,601

Number of refunds: 2,220,029

Total income tax refunded: $5.7 billion

South Carolina

Average refund: $2,569

Number of refunds: 1,719,299

Total income tax refunded: $4.4 billion

Hawaii

Average refund: $2,564

Number of refunds: 535,763

Total income tax refunded: $1.4 billion

Michigan

Average refund: $2,560

Number of refunds: 3,776,668

Total income tax refunded: $9.7 billion

Ohio

Average refund: $2,517

Number of refunds: 4,570,589

Total income tax refunded: $11.5 billion

Minnesota

Average refund: $2,516

Number of refunds: 2,112,212

Total income tax refunded: $5.3 billion

Idaho

Average refund: $2,457

Number of refunds: 561,133

Total income tax refunded: $1.4 billion

Wisconsin

Average refund: $2,436

Number of refunds: 2,236,886

Total income tax refunded: $5.4 billion

Montana

Average refund: $2,401

Number of refunds: 372,817

Total income tax refunded: $895 million

Oregon

Average refund: $2,398

Number of refunds: 1,431,924

Total income tax refunded: $3.4 billion

Vermont

Average refund: $2,392

Number of refunds: 254,192

Total income tax refunded: $608 million

Maine

Average refund: $2,336

Number of refunds: 509,896

Total income tax refunded: $1.2 billion

Average tax refund by state
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Fees

There is no setup fee for this plan, no matter what method you use to apply. You will not need to pay a fee if you make IRS payments via automatic transfer from your checking account, check or money order, but fees do apply if you pay with a debit or credit card.

Forms

If you’re wondering how to set up a payment plan with the IRS, you can apply online using the Online Payment Agreement tool if you owe less than $100,000 in combined tax, penalties and interest. If you don’t qualify to apply online, you can apply by mail, phone or in-person using Form 9465 and Form 433-F. To apply by phone, call 800-829-1040, or the phone number that appears on your bill or notice.

42 PHOTOS
States where Americans pay the highest in state income taxes
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States where Americans pay the highest in state income taxes

California

State income tax: 1% to 13.3% 

Maine

State income tax: 5.8% to 10.15%

Oregon

State income tax: 5% to 9.9%

Minnesota

State income tax: 5.35% to 9.85%

Iowa

State income tax: 0.36% to 8.98%

New Jersey

State income tax: 1.4% to 8.97%

Vermont

State income tax: 3.55% to 8.95%

Washington, DC

State income tax: 4% to 8.95%

New York

State income tax: 4% to 8.82%

Hawaii

State income tax: 1.4% to 8.25%

Wisconsin

State income tax: 4% to 7.65%

Idaho

State income tax: 1.6% to 7.4%

South Carolina

State income tax: 0% to 7%

Connecticut

State income tax: 3% to 6.99%

Arkansas

State income tax: 0.9% to 6.9%

Montana

State income tax: 1% to 6.9%

Nebraska

State income tax: 2.46% to 6.84%

Delaware

State income tax: 2.2% to 6.6%

West Virginia

State income tax: 3% to 6.5%

Georgia

State income tax: 1% to 6%

Kentucky

State income tax: 2% to 6%

Louisiana

State income tax: 2% to 6%

Missouri

State income tax: 1.5% to 6%

Rhode Island

State income tax: 3.75% to 5.99%

Maryland

State income tax: 2% to 5.75%

North Carolina

State income tax: 5.75%

Virginia

State income tax: 2% to 5.75%

Oklahoma

State income tax: 0.5% to 5.25%

Massachusetts

State income tax: 5.1%

Alabama

State income tax: 2% to 5%

Mississippi

State income tax: 3% to 5%

Utah

State income tax: 5%

Ohio

State income tax: 0.495% to 4.997%

New Mexico

State income tax: 1.7% to 4.9%

Colorado

State income tax: 4.63%

Kansas

State income tax: 2.7% to 4.6%

Arizona

State income tax: 2.59% to 4.54%

Michigan

State income tax: 4.25%

Illinois

State income tax: 3.75%

Indiana

State income tax: 3.3%

Pennsylvania

State income tax: 3.07%

North Dakota

State income tax: 1.1% to 2.9%

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IRS Installment Agreement

If you need more than 120 days to pay your tax bill, consider applying for an IRS installment payment plan — also known as a long-term payment plan. It’s convenient to apply and pay online, but you can also call the IRS or the number listed on your tax bill to apply, or apply by mail or in-person. Each set-up method comes with a different fee amount, so choose the method that is both convenient and affordable for you.

After you enter an installment agreement, any future IRS refund payment you are owed will be applied to your debt until it is paid off. If you owe less than $50,000, your IRS tax payment plan can spread the payments over the shorter of 72 months or the longest time the IRS has to collect the debt. If you owe between $50,000 and $100,000, your plan can spread the payments over the shorter of 84 months or the longest time the IRS has to collect the debt.

Learn: Is Taking Out Loans to Pay Off the IRS a Good Idea?

Fees

Here are the amounts you’ll have to pay for installment agreement fees:

  • Long-Term Installment Agreement With Direct Debit, Online Set-Up Fee: $31
  • Long-Term Installment Agreement With Direct Debit, Phone, Mail or In-Person Set-Up Fee: $107
  • Long-Term Installment Agreement With Any Other Payment Method, Online Set-Up Fee: $149
  • Long-Term Installment Agreement With Any Other Payment Method, Phone, Mail or In-Person Set-Up Fee: $225
  • Restructure or Reinstate a Payment Plan Set-Up Fee: $89

If you qualify for Low-Income Taxpayer Status, the fees for setting up a payment plan will be lower:

  • Long-Term Installment Agreement With Direct Debit Set-Up Fee: Fee waived
  • Long-Term Installment Agreement With Any Other Payment Method Set-Up Fee: $43, which might be reimbursed if certain conditions are met
  • Restructure or Reinstate a Payment Plan With Direct Debit Set-Up Fee: $0
  • Restructure or Reinstate a Payment Plan With Any Other Payment Method: $43, which might be reimbursed if certain conditions are met

In addition to the above fees, all individuals regardless of their income level will have to pay the accrued penalties and interest until the balance is paid in full.

Forms

You can apply online using the Online Payment Agreement tool if you owe less than $50,000 in combined tax, penalties and interest, and filed all required returns. If you don’t qualify to apply online, you can apply by mail, phone or in-person using the installment agreement forms — Form 9465 and Form 433-F. To apply by phone, call 800-829-1040, or the phone number on your bill or notice.

Related: 10 Dangerous Excuses For Not Filing Your Taxes

Offer in Compromise

An offer in compromise is a proposal you make to the IRS to pay less than you owe to satisfy your tax debt. An offer in compromise should be your last resort — and you should take this route only if paying the full amount will cause financial hardship.

To be eligible for an offer in compromise, you must meet three criteria. You must have:

  • Filed all your returns
  • Paid all required estimated taxes for the current year
  • Made all required federal tax deposits for the current quarter if you own a business and employ people

If you haven’t made all your payments, you can make your IRS payment online through the electronic federal tax payment system or through IRS direct pay. You can also mail payments to the IRS payment address listed on your notice. 

The IRS will accept an offer in compromise under certain circumstances. The three conditions are:

  1. If there is a genuine tax law dispute regarding whether you owe the tax.
  2. If the IRS doubts the tax debt is fully collectible because of a taxpayer’s limited assets and income.
  3. If requiring payment in full would cause economic hardship or be unfair based on a taxpayer’s individual circumstances.

Related: What to Do When You Can’t Pay Your Tax Bill

Fees

Generally, the filing fee is $186. If you’re making the offer based on doubt that you owe the money, however, or if your income is less than 250 percent of the poverty level, the filing fee is waived.

Once you make an offer in compromise you must submit a nonrefundable payment. That amount must be equal to either:

  • 20 percent of your proposed amount if you’ll be making fewer than five total payments
  • The amount of your first payment if you’ll be paying in six or more payments

If your offer is rejected, the 20 percent payment will be applied to your tax liability.

Forms

You make an offer in compromise by completing Form 656 and Form 433-A. If you’re making the offer because you don’t believe you owe the tax, you must also complete Form 656-L.

Related: 7 Tips For Dealing With a Delinquent Tax Return

IRS Payment Plan for Small Business Owners

If you are a small business owner, you might qualify for a long-term payment plan which will allow you to pay your taxes in more than 120 days. You can apply for a long-term payment plan online if you have filed all required returns and owe less than $25,000 in combined tax, penalties and interest. Note that if you are a sole proprietor or independent contractor, you should apply for an individual payment plan.

To apply for a long-term payment plan as a business owner, you will need:

  • Your Employer Identification Number
  • Date the business was established
  • Address from most recently filed tax return
  • Your caller ID from notice

Related: Drowning in Debt? 18 Effective Ways to Tackle Your Budget

Fees

Here are the fees you’ll have to pay to apply for a long-term payment plan as a business:

  • Long-Term Installment Agreement With Direct Debit Set-Up Fee: $31
  • Long-Term Installment Agreement With Any Other Payment Method Set-Up Fee: $149

With whatever payment method you choose, you will also have to pay accrued penalties and interest until the balance is paid in full. Additional fees apply when paying by card and setup fees might be higher if you apply for a payment plan by phone, mail or in-person.

Forms

Apply online through the Online Payment Agreement tool, or apply by phone, mail or in-person at an IRS walk-in office by submitting Form 9465

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