This topic discusses various options for payment of an outstanding federal income tax liability. Since your unpaid balance is subject to interest that is compounded daily and subject to a monthly late payment penalty, it is in your best interest to pay your tax liability in full as soon as you can to minimize the amount of interest and penalty charged. Penalties are also assessed for failure to file a tax return so it is important to file your tax return even if you cannot immediately full pay the outstanding tax liability.

You may pay your tax liability in various ways. You may pay electronically or by sending a check or money order, made out to "United States Treasury". You may pay the full amount of your outstanding balance or any lesser amount you are able to pay. Please include your social security number on your payment. For information about Ensuring Proper Credit of Payment, refer to Topic 158.

If you are unable to full pay your liability you should consider financing the full payment of your tax liability through loans, such as a home equity loan from a financial institute or credit card. The interest rate a bank charges is usually lower than the combination of interest and penalties imposed by the Internal Revenue Code. If you cannot pay in full immediately, the IRS offers short-term extensions of time to pay in full from 10 to 120 days.

If you cannot full pay your tax liability in a lump sum, the IRS offers a payment by installment option. An installment agreement would allow you to make a series of payments over time. Installment agreements may be set up in various ways:

• Direct Debit from your bank account,
• Payroll Deduction from your employer or
• Regular Installment Agreement

Direct debit or payroll deduction installment agreements provide an opportunity to make timely payments automatically, and therefore, these payment methods reduce the possibility of defaulting your agreement.

• To request an installment agreement, when you are filing a tax return for which you are not able to provide full payment , you may submit Form 9465 (PDF), Installment Agreement Request, or your own written request for a payment plan, attached to the front of your return.
• To request an installment agreement after your return has been filed and you have been billed (you received an IRS balance due notice), you can use the Online Payment Agreement (OPA) application or you may submit Form 9465 or your own written request for a payment plan, attached to the front of your return or bill.

You will need to specify the amount you can pay and the day (1st-28th) you wish to make your payment each month. The IRS will respond to your request, usually within 30 days, to advise you that:

• your request is approved
• your request is denied or
• additional information is needed

If the agreement is approved, a one-time user fee will be charged. The user fee is $105 for regular installment agreements and $52 for agreements to be paid by way of direct debit from your bank account. Taxpayers with income at or below certain levels can apply for a reduced user fee of $43.

For a direct debit installment agreement you will need to provide your checking account number and your bank routing number to initiate the automated withdrawal of the payment.

The user fee for restructuring or reinstating an existing agreement is $45 regardless of income levels or method of payment.

You may contact the IRS by phone or in person, or you may submit Form 9465 (PDF), Installment Agreement Request, through the mail. The form has space for you to write your checking account number and your bank routing number. However, if you choose to do so, you may staple a voided check to the form.

To initiate a payroll deduction installment agreement, submit Form 2159, Payroll Deduction Agreement. Form 2159 must be completed by your employer, so the IRS will set you up a regular installment agreement, and then convert it to a payroll deduction agreement upon receipt of the completed form from your employer.

Remember, penalties and interest will be added to the balance due even if an installment agreement is approved. For more information about installment agreements, please see www.irs.gov and enter the keyword "installment agreement".

It is important not to ignore an IRS notice. If you do not full pay your tax liability or make an alternative payment arrangement to pay the amount you owe in full, the IRS is entitled to take collection action. The IRS may file a Notice of Federal Tax Lien, and may levy and seize your property to satisfy the unpaid liability. You may refer to Topic 201 for information about "The Collection Process".

If you are unable to make any payment at this time:

• Individual taxpayers may call 1–800–829–1040
• Business taxpayers may call 1–800–829–4933 to receive assistance.

If we determine that you cannot pay any of your tax debt, we may temporarily delay collection until your financial condition improves. In order to assist you, we will need you to provide pertinent financial information from documents you should have available to you during the call, such as current pay stubs, rental agreements, or mortgage statements, and car lease/loan statements.

You have rights and protections throughout the collection process. If you would like some printed information on "your rights as a taxpayer," making arrangements to pay your bill, installment agreements, and what happens when you take no action to pay, refer to Publication 594 (PDF), The IRS Collection Process, and Publication 1, Your Rights as a Taxpayer.

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