Irs Direct Deposit Installment Agreement

When it comes to tax payments, the Internal Revenue Service (IRS) offers several options for taxpayers to make their payments. One of these options is the Direct Deposit Installment Agreement, which allows taxpayers to make monthly payments directly from their bank accounts.

An IRS Direct Deposit Installment Agreement is a payment plan that allows taxpayers to pay off their tax debt over time, rather than in one lump sum. This option is particularly useful for taxpayers who may not be able to pay their tax bill in full at once, but want to avoid the penalties and interest that accrue on unpaid taxes.

To be eligible for the Direct Deposit Installment Agreement, a taxpayer must have an outstanding tax debt of $25,000 or less (including penalties and interest). Additionally, they must be able to pay off their debt within 72 months (roughly 6 years) and must be current with all of their tax returns.

To apply for the Direct Deposit Installment Agreement, taxpayers can use the IRS`s Online Payment Agreement tool. This tool allows taxpayers to set up automatic monthly payments from their bank account, which will be withdrawn on a set date each month until the debt is paid in full.

It is important to note that there are fees associated with the Direct Deposit Installment Agreement. Taxpayers will be charged a setup fee of $31, and a reinstatement fee of $89 if they fail to make their monthly payments as agreed. Additionally, interest and penalties will continue to accrue on the outstanding balance until it is paid in full.

Overall, the Direct Deposit Installment Agreement can be a useful option for taxpayers who are unable to pay their tax bill in full at once. By setting up automatic payments from their bank account, taxpayers can pay off their debt over time and avoid the penalties and interest that accrue on unpaid taxes. If you are interested in setting up a Direct Deposit Installment Agreement, visit the IRS website or speak to a tax professional for more information.