The IRS is making it easier for taxpayers who will be making payments on a tax liability over time. Individual taxpayers who have combined liabilities for taxes, penalty, and interest less than $50,000 and businesses owing $25,000 or less for payroll taxes, penalty, and interest qualify for an Online Payment Agreement (OPA). Individuals owing less than $100,000 could also qualify to use OPA to enter into a short-term payment plan. To qualify, all tax filings must be current. Additionally, the OPA tool is available to taxpayers with existing payment plans who want to revise payment dates or amounts or to change the financial institution from which payments are being made.
How does it work? The application to establish an OPA is found online at https://www.irs.gov/payments/online-payment-agreement-application. The taxpayer has to have verified his or her identity with the IRS by signing in through ID.me, a secure account established and maintained by a third-party provider. The ID.me application is done online and requires a photo ID to complete. The taxpayer also has the option of naming a Power of Attorney to act on his or her behalf.
How much does this cost? There is no fee if making an immediate payment of a balance due or establishing a payment plan of 180 days or less, although in the latter case, penalties and interest continue to accrue. Payment can be made directly from a checking or savings account or by check, money order, or credit card (applicable card fees apply).
There is a set-up fee for longer-term arrangements. The fee is $31 for payments made monthly by direct debit and $130 for plans that are not paid by direct debit. Fees are waived for low income taxpayers using direct debit and reduced to $43 and sometimes reimbursed if certain conditions are met when direct debit is not used. There is also a $10 fee to revise an existing installment agreement.
Once the online application is complete, the taxpayer receives immediate notification of approval. This is a completely paperless, impersonal process that should take no longer than a few minutes. If you are a candidate and need assistance, maybe using a Power of Attorney is the way to go. Whether you tackle it yourself or need some help, your tax preparer should be notified.
If you don’t qualify for an online payment plan and are able to pay the liability over time, you can submit Form 9465 to request an Installment Agreement to establish a payment plan. If that is not possible, you can make an Offer in Compromise that, if accepted, will allow for payment of less than the total amount due.
If you need help with any of these options, please contact your tax preparer.
Article Submitted by Lois S. Fried, CPA, CFE, CVA, ABV.