Online Payment Agreements (IRS OPA)

If you have past-due taxes, you have options, and you don’t necessarily have to pay everything upfront. One popular option for taxpayers is setting up an online payment agreement (OPA). This allows you to set up a monthly installment agreement on the IRS’s website without having to talk directly to an IRS agent or submit paperwork via snail mail.

With an online payment agreement, you can stretch your payments over a period as long as 72 months, helping you avoid a lump sum payment and keeping your monthly payments relatively low. Learn more about how to apply for a payment plan, alternatives that may better suit you, and how you can plan for your future tax needs.

Exploring IRS Online Payment Agreements

The IRS allows certain taxpayers seeking tax relief to request a payment agreement online. This is faster and more convenient than applying via paper application, but it is only available to certain applicants. Typically, if you owe less than $50,000 in income tax and penalties, you qualify to use the online application.

Types of Online Payment Agreements

There are two main types of payment plans that you can get online:

• Short-term payment agreements, which must be paid off in 180 days or less and are available on balances up to $100,000.
• Long-term installment agreements, which can last as long as 72 months and are available on balances up to $50,000.

If your balance is over the above thresholds, you may still qualify for a payment plan. You just won’t be able to apply online.

Benefits of Online Payment Agreements

Online payment agreements offer a wide range of benefits to applicants. You get a decision from the IRS immediately about whether or not your payment plan is approved, which can be a huge relief for those who have had the threat of tax issues looming over their head for some time. 

Additionally, online payment agreements come with much lower setup fees than other types of payment agreements. Even more importantly, when you apply online, you don’t have to complete a financial disclosure which you may have to do if you apply through other channels and owe over those thresholds.

Eligibility and Suitability for Online Payment Agreements

While online payment agreements are a dependable option for many taxpayers, not everyone qualifies. Some applicants need to request an installment agreement over the phone or via Form 9465, while others do not qualify for an installment agreement at all.

Eligibility Criteria

First, you have to make sure the amount you owe allows you to apply for a payment plan online. If you are requesting a short-term payment plan, the total amount you owe—including taxes, penalties, and interest—must be less than $100,000. Those requesting an installment agreement must owe $50,000 or less. 

You must also have filed all required tax returns. If you owe above those thresholds and you make a payment to bring your balance below those amounts, you qualify to apply online.

Assessing Suitability

Even if you technically can apply for a payment plan online, that doesn’t necessarily mean that it is the best option for you. By dividing the amount you owe over the number of months your payment plan would last, you can figure out roughly how much your monthly payment would be. Round up to account for interest and fees rolled into your installment agreement.

It’s important to be extremely realistic about how that number fits into your budget, especially if you plan on extending your payments over 72 months. Is the number too close for comfort? Does it mean cutting out all forms of fun and relaxation, such as going out to eat occasionally or ever buying new clothes? While most people can do that for a few months, doing so for years on end is not usually realistic—it lays the groundwork for falling behind and ending up in an even worse financial situation. 

If you were to face an emergency that required you to clear out your savings or take on more debt, such as a car repair, would you still be able to make your monthly IRS payments? Before you agree to an installment agreement, you should be completely certain that you can make the monthly payment without putting yourself into a precarious financial situation. 

A lot of people who set up payment plans would have qualified for an offer in compromise. Talk with a tax attorney to see if that’s an option for your situation.

Application Process for OPAs

The process of applying for an online payment agreement is straightforward and simple. Knowing what to expect makes it easy to have the necessary documents on hand so you can go through the application process in one session.

You apply online via the Online Payment Agreement tool with these steps:

1. Access the IRS Online Payment Agreement page. This is where you start the process. If you received an IRS notice prompting you to pay, they will say to go to IRS.gov/opa, which redirects to the online payment agreement page.
2. Before you begin, you will need to verify your identity to set up an account with ID.me. If you already have an account on ID.me, you can simply log in. If not, you need an ID and a smartphone to set up an online account.
3. Your account will show you how much you owe and allow you to either make payments or set up a payment plan.
4. Click the “payment plan/installment agreement.” You can then move through the options, which allow you to choose whether or not you want a direct debit agreement where the payment comes out of your bank account automatically. Direct debit agreements are less costly to set up and they also ensure that you do not accidentally miss a payment. You can also propose a minimum payment.
5. If the minimum payment is equal to or greater than what the IRS has calculated and you meet their other requirements, they will likely allow you to move forward with your chosen monthly payment.
6. If the minimum payment is lower than their calculation, they will tell you the lowest monthly payment you can make and ask if you want to move forward with that minimum monthly payment.
7. If you have opted to pay with a direct debit installment agreement, you will have to enter your account number and routing number. You can then confirm the agreement, read the terms and conditions, and accept the plan.
8. Those who do not have a direct debit installment agreement will need to agree to make payments by the given due date every month, either by mailing a payment or paying online. After you accept the terms and conditions, your installment agreement will begin.

Preparation Checklist

The IRS generally has most of the information they need to process your online payment agreement application, but having the following items and information ready can streamline the process:

• Your photo ID so you can verify your identity with the IRS
• Your bank account number and routing number
• Information on your tax debt so you can verify its accuracy

Understanding Payment Plan Terms and Conditions

An installment agreement is a major commitment, and it’s crucial that you know exactly what you’re agreeing to before you (digitally) sign on the dotted line.

Before your installment agreement is finalized online, you will need to read and accept the terms and conditions set forth by the IRS. These do change periodically, and it is crucial to read them through before you click through to the next screen. If you unintentionally break these terms and conditions simply because you did not read them, that won’t protect you from the consequences of defaulting on your installment agreement. Currently, the terms and conditions include:

• The agreement remains in effect until the entire debt, including interest and penalties, is paid off.
• You must continue to file all federal tax returns as filed and pay new tax debt on time.
• Tax refunds and overpayments will be applied to your tax debt.
• If you default, you have to pay the user fee again if the IRS agrees to reinstate the agreement.
• The agreement may be terminated if you fail to make monthly payments, don’t pay new federal tax debt when it’s due, or do not provide financial information when the IRS requests it.
• If your agreement is terminated, the IRS can attempt to collect the entire amount due via levy, lien, garnishment, or any collection action they deem necessary.

Staying on Track With Your Online Payment Agreement

Getting your online payment agreement approved is just the first step in tackling your tax debt and staying compliant with IRS regulations. Stay on top of your payment plan and your ongoing tax requirements to avoid further issues.

One of the easiest ways to stay on track with your online payment agreement is to set up a direct debit installment agreement. This way, your on-time monthly payments aren’t dependent on you remembering that they’re due—they come out like clockwork without any further action from you. If you worry about keeping the appropriate amount of money in your account, you can set a recurring alarm on your phone for a few days before your due date to remind yourself to check your balance.

You may also want to check your IRS account a few times a year until it is paid off. Monitoring the account allows you to catch any missed or late payments before they progress to more aggressive collection actions, and for many people, seeing their tax debt decrease over time can be very motivating.

If you encounter unexpected issues with your installment agreement, most of your issues can be managed online. After you log in to your IRS account, you can use the drop-down menu to modify your current payment plan. You can change the type of payment plan you have—for example, you may switch to a direct debit plan or a standard installment agreement—and change your monthly payment amount if it’s above the minimum and is too much for you to afford. You can also change the monthly due date if, for example, you want the payment to come out the day after you get paid each month.

What if a financial emergency leaves you unable to make monthly payments? It is crucial to take action before you miss a payment. Once a payment is missed, your payment plan may automatically default, which means your entire balance is due in full. But if you call the IRS before you miss a payment and explain your situation, there are more options available to you. They may recalculate the payment plan, add missed months to the end of your payment plan and extend it for you, or allow you to roll new tax debt into your installment agreement if you are unable to pay a new tax debt. Being proactive is key.

Alternatives to Online Payment Agreements

While online payment agreements are convenient and affordable options for many taxpayers, they are not always the best option. If you’re on the fence, it’s worth looking into your other options to make sure you’re choosing the best path for your financial future.

Other options for addressing your tax debt include:

• Paying in full: This allows you to save money on interest and keeps the option of a future installment agreement open should you find yourself in tax debt. While it’s not generally a viable option for those considering a payment plan, it is worth considering if it’s a matter of just dipping into savings or using a line of credit with a low interest rate.
• Offer in compromise: For those who are unsure of their ability to commit to the minimum monthly payment required, an offer in compromise may be a better solution. This settles your tax debt for less than you owe. The amount that the IRS will accept depends on the details of your financial situation.
• Currently not collectible: If you are currently unable to make any payments without putting yourself through financial hardship, the IRS may agree to consider you currently not collectible. This is a temporary measure, but it may give you time to get caught up.
• Partial payment installment agreement: Similar to an offer in compromise, a PPIA allows you to pay off your debt for less than what you actually owe. You make smaller minimum monthly payments until the collection statute runs out on your debt, and at that point, the IRS writes off the rest.

Factors to Weigh in Your Decision

First, know that all of these options—beyond paying in full—require the IRS to take a thorough look at your finances. You’ll need to provide information on your income, debt, assets, and financial obligations. If the IRS believes that you can afford an installment agreement or to pay in full, currently not collectible status, a PPIA, or an offer in compromise will likely not be available to you.

However, if you are genuinely struggling to afford the minimum monthly payment required for an online payment agreement, you may want to discuss these options with a tax professional. It is far too easy to agree to an uncomfortably high payment, only to fall behind when life happens and you’re hit with an emergency medical bill, car repair, or lost job. If another option can save you more money, it is worth considering.

Future Tax Planning Strategies and Resources for Help

Part of maintaining your payment agreement is making all future tax payments on time and in full. This may require adjusting your tax planning.

This is a good time to meet with a tax professional to figure out how you can avoid having a huge tax bill next tax season. If you are self-employed or a sole proprietor, you are likely required to make estimated tax payments. If you’ve never made estimated tax payments and you’ve just paid the penalty each year, making your quarterly payments can save you a significant amount in penalties and help you avoid the shock of an end-of-year tax bill. If you do make estimated tax payments but still had a tax bill last tax season, it may be time to increase your quarterly payments.

Those who are traditional employees can often avoid a sizable tax bill by adjusting their withholdings. While many people turn to their human resources department for help with this, they aren’t necessarily tax experts. If you’ve already felt the sting of an unexpected tax bill, talking to a tax pro is worth avoiding that experience again.

There are many resources available to taxpayers who want to stay on top of their tax situation and avoid falling out of compliance with IRS requirements:

• Taxpayer Advocate Service
• IRS Online Account Login
• IRS Tax Withholding Estimator
• Overview of IRS help options for taxpayers

Taking charge of your taxes before the IRS starts collection actions is key to managing your financial well-being and giving yourself plenty of repayment options. Whether the best choice for you is an online payment agreement or another payment solution, it’s time to take control of your taxes and get on track. 

With the resources available to you, including the team at Damiens Law, you can get caught up on your tax debt and give yourself a fresh start. Call us at 601-957-9672 or reach out online to get started.

Frequently Asked Questions

How long do I have to pay my taxes with an online payment agreement?

If you choose a short-term payment plan, you have up to 180 days. If you select a long-term installment agreement, you have up to 72 months.

How much is the setup fee?

Short-term payment plans have no setup fee. The cost to set up a direct debit installment agreement online is just $22, compared to $107 when you apply via mail, over the phone, or in person. If you choose an installment agreement without direct debit, the online fee is $69 and other signup methods cost $178.

What if I can’t afford the setup fee?

If you qualify for low-income status, you can have the direct debit setup fee waived. Those who choose a non-direct debit option may have the fee dropped to $43.

What if I can’t apply online?

Those who don’t meet the qualifications to apply online may still qualify for a payment plan. You can call the IRS, apply at your local office, or file Form 9465.

How can I avoid defaulting?

Direct debit payments make it easy to avoid defaulting on your loan. You can also use recurring reminders on your phone or calendar to ensure that you make all payments on time.

Can I have more than one online payment agreement at once?

You cannot have multiple installment agreements at once. Depending on your circumstances, the IRS may allow you to roll new tax debt into your current installment agreement.

Do I get to keep my tax refunds with an installment agreement?

No. New tax refunds will be applied to your tax debt.

Can I get out of paying penalties?

In certain scenarios, taxpayers may qualify for penalty abatement. This is generally available to taxpayers with a strong history of on-time tax payments. However, while you make payments, the failure to pay penalty will be added to your account, but it will only be 0.25% per month