If i have a payment plan with the irs

Many have been in this scenario: You file your taxes using an online tax software, paper filing or an accountant, and after entering all of your numbers (and double checking them for accuracy), you're hit with a fact you've been dreading — you owe the government money.

Fortunately, the IRS accepts a variety of payment methods, from good old-fashioned paper checks to debit and credit cards. Just be sure to consider all the fees when you pay taxes with a credit card. But what happens when you can't afford to pay your tax bill in one big lump sum?

Select details your options for paying your tax bill over time, and what you need to know about payment plans through the IRS.

Paying your taxes over time

In 2022, the deadline to file your 2021 taxes is Apr. 18. And even if you're afraid you won't be able to afford paying your taxes, it's better to file and set up a payment plan than to avoid filing entirely. This could lead to interest and penalties.

So if you get the dreaded news of owing Uncle Sam, here are your options of extended payment plans:

Short-term payment plan fees (180 days or less)

After applying for a short-term payment plan, you can pay the amount owed directly from your checking or savings account (Direct Pay) or by check, money order or debit/credit card. Here are the fees you'll pay with the short-term payment plan:

• $0 setup fee
• Interest until the balance is paid in full
• Penalties for non-paymentup to a maximum of 25% unpaid tax amount until balance is paid in full

Learn more about IRS interest and penalties.

Long-term payment plan fees

Long-term option A: Monthly automatic withdrawals

With this plan, you pay a set monthly amount through automatic withdrawals, similar to an installment loan. It's the least costly of the long-term plans. These are the fees associated with the long-term payment plan via monthly automatic withdrawals:

• $31 setup fee (if you qualify as low income, the setup can be fee waived)
• Interest until the balance is paid in full
• Penalties for non-payment up to a maximum of 25% unpaid tax amount until balance is paid in full
• Applicable card transaction fees

Learn more about IRS interest and penalties.

The payments accepted with this plan are more limited, with just one option called the Direct Debit Installment Agreement (DDIA). This is essentially an authorized debit withdrawal from your checking account, and it's required for this plan.

Long-term option B: Pay each month (non-Direct Debit)

This option doesn't require setting up DDIA, giving you more flexibility. But it will cost you more in fees:

• $130 setup fee (if you qualify as low income: $43 setup fee that may be reimbursed if certain requirements are met)
• Interest until the balance is paid in full
• Penalties for non-payment up to a maximum of 25% unpaid tax amount until balance is paid in full
• Applicable card transaction fees

After applying for this plan, you'll pay the the taxes you owe via non-Direct Debit (not automated) monthly payments, including payments directly from your checking or savings account (Direct Pay) or by check, money order or debit/credit card.

Other options to pay your taxes over time

The IRS charges set-up fees for those who need to pay their taxes over time. But there might be more affordable options, such as using a 0% APR credit card to pay your tax bill or even taking out a personal loan.

When comparing costs, calculate how much the interest and fees will cost you over time. But if your credit score is good enough to qualify you for either a 0% interest credit card or personal loan, you should do the math to find out which payment option is cheaper. Then choose the one that costs the least over time and has a monthly payment you can afford.

If a 0% interest credit card is a viable option for you, and once you're approved for the card, the next step is to visit this IRS webpage and pick a payment servicer. Pay1040 charges a fee of 1.87% to use a credit card to pay taxes, and the rewards from some credit cards can even negate this fee.

Here are a few of our best picks for 0% APR credit cards and personal loans.

Still waiting to file? The tax deadline is approaching

There's just about one month left to file taxes on time without penalty, with the April 18 deadline just around the corner. As many as 90% of taxpayers file electronically, since it's faster, easier and more convenient.

Select reviewed 12 tax filing programs that can help you file your taxes faster. We evaluated them on a range of features, including cost, user experience, expert tax assistance and Better Business Bureau rating.

Here are the best tax filing programs:

• Best overall tax software: TurboTax
• Runner-up: H&R Block
• Best free tax software: Credit Karma Tax
• Best affordable tax software: TaxSlayer
• Best for accuracy guarantee: TaxAct

Bottom line

Paying your tax bill is never a great feeling, especially if you're on a strict budget. However, there are options to stretch out your payments to minimize the impact on your monthly budget.

If your yearly tax bill is higher than expected, you may want to consider adjusting your tax withholding with your employer, or consider paying quarterly taxes if you're self-employed.

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Information about the Amex EveryDay® Credit Card has been collected independently by Select and has not been reviewed or provided by the issuers prior to publication.

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Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

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