You owe taxes but don’t have the money to pay. Can the IRS help?

As we discussed two weeks ago, we are approaching the 2019 COVID postponed tax filing deadline. Tax day is July 15th.

July 15th is also the deadline to pay the 2019 tax balance, and although the IRS provides tax filing relief by allowing an automatic extension of time to file, it does not extend the same courtesy to payments.

Your 2019 tax balance is due on July 15th, with no extension possible.

What can you do if you do not have the money to pay? Can the IRS help you in any way?

The most likely answer is YES.

IRS Installment Agreements

An IRS installment agreement is a payment plan offered by the IRS to pay off your tax debt, including unpaid tax, penalties and interest, in equal monthly installments.

These loans can he as short as 120 days long (short-term payment plan) or as long as 60 months long (long-term payment plan).

Many of these loans can be applied for online, and the application and approval process can be streamlined, depending on the amounts involved and period of the loans. Online applications are available for:

  • Long term loans of up to $50,000
  • Short term loans of up to $100,000

What are the requirements to apply online?

  • Having a maximum tax, penalties and interest combined balance within the limits stated above
  • Being up to date with your tax return filings

What information does the IRS require to approve these loans?

  • Your name and address exactly as they appear on your most recent tax return
  • A valid email address
  • Your date of birth
  • Tax filing status
  • Social Security Number or Individual Taxpayer Identification Number

The IRS will need to confirm your identity, and for this purpose, you will need to provide a US financial account number that the IRS can verify through the US credit database, or have a US mobile phone registered in your name (mine is registered in my hubby’s name, which is a problem!), or provide an activation code that the IRS will mail to you, to your last known address.

Those of you living overseas may not have US bank accounts or US mobile phones for identity verification purposes, and you may need to rely of the mailed verification code. If this is your case, make sure the IRS has your correct mailing address, and be prepared to wait a few weeks for the IRS letter.

Short term loans are free to set up and they can be paid by check, direct bank debit or credit card. Credit card payments incur a credit card surcharge fee.

Long term loans have set up fees of $31 for direct debit loans, known as DDIAs. The set-up fee is $149 when the payments will not be debited directly and will be made either by check or credit card.

Important considerations:

  • Although the loans do not incur an interest charge, IRS penalties and interest for late payment of tax continue to accrue until the entire loan balance is paid off. As a result, paying the balance in full and obtaining financing through other means, like a bank loan, may result in lower overall costs.
  • If you live abroad, be aware that the IRS can request the Department of State to revoke your passport if you have seriously delinquent tax debt. It is important to keep your installment agreement in place and make the required monthly payments once approved by the IRS.
  • If you are not able to meet your payment schedule, you can request a revision of your payment plan. You may need to fill out additional application documents to obtain this approval.
  • If you default on your IRS loan, you can request reinstatement. A loan reinstatement fee may apply.
  • If you find the loan application process intimidating, you can retain an IRS Power of Attorney to represent you and apply for the loan on your behalf. CPAs, enrolled agents and tax attorneys can act as IRS Powers of Attorney.
  • You can find more information about obtaining tax debt financing from the IRS on their website using the button below.

And with this, I leave you to enjoy the last Sunday of June. Until next week,

With much love,

Marina