Payment Options: IRS Issues Reminder to Taxpayers Unable to Clear Balances in Full

Taxpayers may qualify for settling their dues for a lower amount in some cases, the agency said.

The IRS in Washington on Jan. 9, 2025. Madalina Vasiliu/The Epoch Times

The IRS on April 3 asked taxpayers unable to pay their tax bills to explore the agency’s payment plans to resolve the issue.

Taxpayers “don’t need to wait until April 15 to file their 2024 federal return, and if they owe and are unable to pay the balance in full, there are payment plans available to help them pay their tax obligation,” the agency said in a statement.

A short-term payment scheme is available if the taxpayer owes less than $100,000 in taxes, penalties, and interest to the IRS. The repayment has to be made within 180 days. Application may be done via mail, phone, or in person.

Taxpayers can pay through bank accounts, checks, debit/credit cards, money orders, or the Electronic Federal Tax Payment System. The plan does not charge any setup fees.

A long-term payment plan is for taxpayers who owe less than $50,000 to the agency. Payment terms last up to 10 years, with monthly installments. A $22 setup fee and other charges apply.

Applying for a payment plan can be done through the IRS website.

“Once the online application is complete, the taxpayer is notified immediately whether their plan is approved. There’s no paperwork and no need to call, write or visit the IRS,” the agency said.

Those who do not qualify have two options when it comes to paying off dues.

The first is seeking out an “offer in compromise,” which is for people who qualify to settle liabilities for less than the owed amount.

The agency considers various factors when assessing such applications, including the taxpayer’s ability to pay and their income, expenses, and asset equity.

“We generally approve an offer in compromise when the amount you offer represents the most we can expect to collect within a reasonable period of time,” the agency said.

Taxpayers can check eligibility via the “Offer in Compromise Pre-Qualifier” tool.

The second option is to request a temporary delay in the collection of dues. This is applicable if the IRS determines that the taxpayer is not in a position to pay what is owed. Any applicable interest and penalties will continue accruing until the due amount is paid in full.

“The IRS urges those who cannot pay their full balance to file and pay as much as they can on or before April 15. Filing on time avoids the late filing penalty, which is usually 5 percent per month on the unpaid balance,” the agency said.

“In addition, by paying at least part of what they owe on time, taxpayers can reduce the amount of interest and late payment penalty that will be added to any payments made after April 15. Currently, the interest rate is 7 percent per year, compounded daily, and the penalty rate is usually 0.5 percent (one-half of one percent) per month.”

‘Common-Sense Fixes’ to IRS

While tax year 2024 returns are due on April 15, there are “exceptions for taxpayers in a disaster area, combat zone, or living and working abroad.”

Disaster victims have an additional six months beyond the April 15 date to file and pay the 2024 returns.

Earlier this year, the IRS announced that various tax filing and payment deadlines were shifted for victims of the California wildfires. Deadlines occurring between Jan. 7 and Oct. 15, including the April 15 federal tax filing final date, were moved to Oct. 15.

In February, the IRS postponed tax due dates falling between Feb. 14 and Nov. 3 for individuals and businesses in Kentucky who were affected by storms, flooding, and landslides in the state. They have until Nov. 3 to pay and file their 2024 taxes.

A group of lawmakers released a draft bipartisan legislation in January that seeks to make “an array of common-sense fixes” to the IRS, according to a Jan. 30 statement from the U.S. Senate Committee on Finance.

The plan requires the IRS to improve the “math error” notices issued to taxpayers so that people can better respond. It asks the agency to streamline the review of offers-in-compromise to ensure debts owed by taxpayers are resolved.

It suggests increasing criminal and civil penalties on tax professionals who act in a manner harmful to clients. The legislation also asks the IRS to clarify and expand Tax Court jurisdiction, which would allow people to pursue their claims at appropriate venues.

“This draft legislation suggests practical ways to improve the taxpayer experience,” said Sen. Mike Crapo (R-Idaho) and Sen. Ron Wyden (D-Ore.), the two lawmakers who issued the proposal.

“These adjustments to the laws governing IRS procedure are designed to facilitate communication between the agency and taxpayers, streamline processes for tax compliance and disputes and ensure taxpayers have access to timely expert assistance.”