​5 Options If You Get an IRS Balance-Due Notice

If you’ve gotten a balance-due notice from the IRS, you’re not alone. Since the agency has started getting caught up in its backlog of returns, correspondence, and other items, it’s ramping up its collection letters again.

You’ve got about five options when it comes to a balance-due notice. Note that one of those options is not “ignore it.” Usually, the IRS will send you a series of reminders if you owe taxes. After that, they’ll start the collection process. That’s not fun for anyone.

So, below are your options for dealing with the notice. If you need help figuring out the right choice for you, let us know.

No. 1: Pay the whole thing

Kinda a no-brainer here. This option assumes you have enough money to pay your tax bill in full. If you do, great. You can pay on the IRS’s website.

If you opt to go the check route, you might want to send it by certified mail. Also, check the status of your payment. The IRS is still dealing with processing delays, so it can take three weeks for them to process your payment.

No 2: Ask for an extension

If you need more time to get your finances in order, the IRS offers a 180-day extension. You can ask for that extension online if you owe less than $100,000. You can also call the IRS.

There is no fee to set up an extension, and you avoid the notice of a federal tax lien. The catch is if you get assigned to a local IRS revenue officer, an extension’s off the table.

Once you’ve filed for an extension, you’ll get a letter from the IRS confirming it and listing your payoff amount after 180 days. You can make payments during that time or wait until the end to pay it all off.

If you can’t pay it all off at the end of the 180 days, you can contact the IRS for other options, like setting up a payment plan.

No. 3: Set up a payment plan

Most taxpayers opt for this option. And there are several different plans to consider.

All payment plans have set-up fees that range from $31 to $225. For the lowest fee, set up your agreement online and make auto payments. If your income’s low enough, you might not have to pay a fee or get a reduced one.

• Guaranteed installment agreement. This one’s automatic if you meet the right conditions. If you owe as much as $10,000, you can pay it off over three years. But you can’t have been on a payment plan during the past five years. You can apply online or by calling the agency directly.
• Streamlined installment agreement. This plan allows people who owe up to $50,000 to pay within 72 months. You can set up an SLIA for a tax balance for one year or multiple years. If you owe between $25,000 and $50,000, you have to make automatic payments, like directly from your bank account. You can apply online, by phone, or by mail using Form 9465.
• Full-pay non-streamlined payment plan. Under this plan, you can owe up to $250,000 and make payments until 10 years from the date the IRS assessed the tax. You have to set up this plan by phone and can make auto payments or send a check every month. Note that if you owe more than $10,000, the IRS will probably file a tax lien. For this reason, you might want to pay your bill so that it’s less than $50,000 and then set up an SLIA to avoid that lien.
• Ability-to-pay plan. If you can’t meet the conditions of the other three and own more than $250,000, you might have to set up a plan based on your ability to pay. This one gets tricky because the IRS looks at all your assets, income, and expenses, and then you have to provide evidence of your ability to pay.

No. 4: Temporary hardship or currently not collectible

This one is similar to the ability-to-pay plan. The difference is there’s no set-up fee. But you’re still likely to see a lien. Also, it’s a temporary status, and the IRS looks at it every year.

No. 5: Offer in compromise

Also similar to ability-to-pay plans and currently not collectible. OICs have a lot of rules, and the IRS doesn’t grant them very often. There’s an initial $205 application fee, and other payments may pop up along the way. It can also take anywhere from eight to 12 months to complete.

If you have questions about your balance-due notice, reach out to us.