The Online Payment Agreement Application is a web-based process offered by the Internal Revenue Service for individuals and businesses that cannot pay all taxes owed on the due date. Though the agreement, which sets up an installment account for qualifying individuals, can be helpful in some cases, it may not be the right choice for every taxpayer.
The agreement application is available to individuals who owe $50,000 or less to the IRS when all owed taxes, penalties and interest are combined. Businesses qualify for the application if the organization owes $25,000 or less. Both businesses and individuals must have filed all relevant tax returns and forms prior to completing the agreement application.
Filing an agreement application doesn’t stop penalties and interest from accruing on tax debt, however. There are also fees to set up payment agreements. Fees range from $43 to $120, depending on how you elect to make payment and what income you report.
The online payment agreement may not be approved in all circumstances. Taxpayers must also agree to pay off all taxes within 72 months and may not be able to create a new installment agreement while a preexisting agreement is in effect.
In cases where a taxpayer can’t pay off the debt within 72 months or doesn’t qualify for the IRS online application, other application procedures are available. Often, seeking assistance from a third party who understands IRS collection and negotiation processes is better than completing applications yourself. Experienced professionals may be able to negotiate more favorable terms or even work with you to reduce the amount you owe the IRS.
Source: IRS, “Online Payment Agreement Application” Oct. 30, 2014