Taxpayer asks: After filing my taxes, the end result was that I owe just over $800. Gasp! This is three weeks pay for me and I have NO savings at all. Can I make payments to the IRS? Is there any help they offer for people in my situation?
Taxgirl says:Absolutely! You can establish a payment plan with IRS to pay taxes that you cannot pay in full.
Since you owe less than $25,000, you can complete an online application or manually fill out a federal form 9465, available on the IRS web site.
If you owed more than $25,000, not only would you personally be in a complete panic attack now (since you’re already freaked out about the possibility of $800), but you could not complete the online application. You would still complete a federal form 9465 but you might also need a federal form 433F.
The interest on most of these agreements is relatively low.
However, here’s the rub: there’s now a fee for these agreements. The fee for new installment agreements entered into after January 1, 2007 is $105 or $52 for direct debit agreements. If that’s too steep and you think you qualify, taxpayers with income at or below established levels, based on the Department of Health and Human Services poverty guidelines (starting at $10,000 for one person households), can pay a reduced user fee of $43 for establishing new agreements.
For a sum as low as $800, you might consider borrowing the money from a friend or family member in order to avoid the user fees. If that doesn’t work, the fee and interest isn’t that bad if you can pay it off within a year, so it’s a good option.
As previously reported, the IRS appears to be on a fee raising binge… And they’ve struck again!
According to the IRS, as of the first of the year (January 1, 2007) fees for installment agreements will increase as follows:
-
The fee for new direct debit installment agreements, where payments are deducted directly from a taxpayer’s bank account, will increase from $43 to $52.
-
The fee for other new installment agreements will increase from $43 to $105.
-
The fee to restructure an existing or reinstate a defaulted installment agreement will increase from $24 to $45.
These fees will also apply to the online payment agreements.
Averaged together, this represents an increase of nearly $12 per agreement. You think that doesn’t add up? Last year, taxpayers reached agreement on 2.8 million payment plans. At an average increase of $12 per plan, that adds up to $33.6 million – which is the total cost of the entire Housing and Urban Development budget for the fiscal year 2007.
In part of its efforts to get more money faster be more tax-payer friendly, the IRS has finally brought its Installment Plan Agreement online.
The OIA is not to be confused with the OIC, the Offer in Compromise, which allows you to apply to reduce the total amount of tax due either because it is not your debt or because you cannot pay. The OIA is a mechanism that allows you to pay the total amount of tax due (including any applicable interest and penalties) over a timeframe agreeable to the IRS.
More importantly, you must be compliant to file the OIA. Compliant means that you are up to date with the filing and payment of all taxes (except, of course, the payment of those that you are applying for).
The OIA is available to taxpayers with $25,000 or less owed to the IRS. The OIA may be available to taxpayers who owe more but the IRS will likely require additional financial information filed together with a federal form 433F.
Curiously, the OIA is not available 24 hours per day, but only at the following times:
Monday – Friday 6:00 a.m. – 12:30 a.m. Eastern Time
Saturday 6:00 a.m. – 10:00 p.m. Eastern Time
Sunday 4:00 p.m. – 12:00 a.m. (midnight) Eastern Time
