How and When to Set Up Payment Plans for Tennessee DOR Taxes Owed

If you owe money to the Tennessee Department of Revenue but you can’t pay it off in full, it may be time to consider a payment plan. Payment plans allow you to get back on track with your state taxes and avoid aggressive collection actions while still staying within your budget. Learn more about how Tennessee payment plans work, when they are and are not the right choice for you, and how to apply.

Key Takeaways

• The Department of Revenue offers installment payment agreements to those who cannot pay in full.
• You must be able to pay your balance off in no less than two months and no more than 60 months.
• Applying online via the TNTAP allows you to get a decision immediately, but you can also apply via email.
• Make all required payments on time and file all returns on time to stay compliant.

When is a Payment Plan the Right Option for You?

The Department of Revenue has a set collection process for when a business has failed to pay excise tax or other state-mandated taxes. If you’ve received one or more tax bills, you’re unable to pay your tax bill in full, and you’re able to afford monthly payments, a payment plan may be the right choice for you.

An Overview of Tennessee DOR Payment Plans

The Tennessee Department of Revenue offers installment payment plans to qualifying taxpayers who are unable to pay in full. You can use an installment payment plan to pay taxes from your standard returns and liabilities assessed after an audit. Interest is charged on payment plans, but once your payment plan application is accepted, further penalties will not be assessed.

Note that you must be up-to-date with all outstanding tax returns before requesting a payment plan.

Qualifying for a Payment Plan

The basic requirements for a Tennessee tax payment plan are straightforward:

• The payment plan must allow you to pay off your tax debt in two to 60 months
• You must owe at least $300
• Payments must be at least $50
• Payments must be automatically drafted from your bank account
• If you have had two or more payment plans in the last two years, you must make a 25% down payment to have further requests considered

How to Apply for a Payment Plan

There are two main ways to apply for a payment plan: online or through email.

Applying online gives you an automatic decision and lets you set up your payments immediately. To apply online, you can log into your Tennessee Taxpayer Access Point account. You’ll select the first date on which you can make a payment, indicate the number of payments you want to make, include any down payment you wish to make, and enter your banking information. After filling out the application, you’ll find out if you’ve been approved or not.

If you cannot apply online, you can fill out the Installment Payment Agreement Application and email it to Payment.Plan@tn.gov. The application requests information on the types of tax liabilities you have, your legal structure, information on why you are requesting a payment plan, information on your financial condition, and a list of supporting documents. Make sure you submit all supporting documents with the application to ensure you receive fair consideration.

What Happens After an Approval?

After your payment plan is approved, payments will be withdrawn from your bank account automatically on your chosen due date. Ensure that you have the funds in your account every month, since missing a payment is against the terms of your payment plan. A returned payment may result in termination of your payment plan and the Department of Revenue demanding payment in full. You must also file all new tax returns by their due date and pay new tax bills as you receive them. New tax debts are not automatically added to your payment plan, and failing to file or pay on time may result in termination of your payment plan.

If you don’t meet the requirements set out by the Department of Revenue, they will send you a Payment Plan Default notice. This notice gives you a deadline by which you must resolve the deficiencies to avoid your plan going into default. Should you fail to resolve the deficiency, the total balance will be due, and outstanding tax liabilities will be sent to collections.

You can pay your balance off early whenever you wish. Before doing so, though, you should contact the Installment Payment Agreement Unit directly to get your early payoff amount. Note that any early payoff must be completed no later than five days before the next payment date, otherwise, the next payment will still be withdrawn from your account. If you pay your balance off early, make sure you log into your Tennessee Taxpayer Access Point account to stop future payments.

Other Payment Options to Consider

As you explore your options, it’s important to remember that interest is charged on all installment payment agreements. For the fiscal year ending in June 2025, the interest rate is 13.25%. If this is higher than the interest rate you can get on a credit card or personal loan, the DOR recommends looking into that option to save money on interest.

Another option to consider is an offer in compromise. The Offer in Compromise application calculates the amount you would be able to pay over a three-to-five-year timeframe. Factors that they take into account include your ability to pay, equity in your assets, your income and allowable expenses, changes in circumstances, and whether or not they can expect you to comply with tax laws in the future. The application requires an in-depth financial disclosure.

Note that requesting an offer in compromise does not stop any ongoing collection efforts, and if you currently have a payment plan, you must continue to make payments to avoid defaulting. It is fairly difficult to qualify for an offer in compromise, but it may be worth exploring if you have significant financial hardship.

Staying Compliant and Avoiding Future Tax Issues

If you’re approved for an installment agreement, it’s important to comply with all DOR requirements and set up safeguards to avoid falling back into state tax debt. You may do so by:

• Making all payments on time. Avoid late or missed payments by keeping the necessary amount of money in your account on each payment date, updating your banking information as needed with the Department of Revenue, and checking your account on a regular basis for any important notices.
• Filing and paying taxes on time. File new tax returns on time and pay all accrued taxes by their due date. If you cannot pay new tax bills on time, be proactive and contact the DOR right away about rolling the new balance into your current payment plan.
• Figuring out why you fell behind and setting up new protocols. The steps you take to accomplish this depend on which types of tax debt you accrued and how it happened. For example, if you fell behind on your business tax, you may want to retain a CPA who specializes in business accounts, set up separate accounts to keep your tax money separate from your other funds, and review your numbers several times throughout the year to make any necessary changes.
• Running regular internal audits. Avoid unnecessary errors that may result in large tax bills by auditing your business’s finances on a routine basis.

If you owe state taxes, addressing your debt as soon as possible gives you access to a variety of payment options. Setting up a plan for your tax debt right away limits how much you pay in penalties and interest while also protecting you from certain collection actions. Find out how a tax professional can help you apply or look into other options. Call Damiens Law at 601-476-2693 or reach out online to set up a time to talk.

Frequently Asked Questions

How long does it take to get approved for a payment plan?

If you apply via the online portal, you should receive a decision immediately. If you send in your application packet over email, the Department of Revenue will reach out to you as soon as they have processed your documentation.

Can I choose my monthly payment amount?

As long as the amount is over $50 and allows you to pay off your balance in no less than two months and no more than 60 months, you can typically choose your own payment amount.

What happens if I default?

The DOR does give you a chance to resolve your deficiencies before they default on your installment agreement. If you fail to fix the issues, the entire amount becomes due immediately and they can send the bill to collections.

Can I pay off the plan early?

Yes, but you must contact the IPA Unit ahead of time to set up an early payoff. You must also submit your payment at least five days before your due date.

Are business taxes eligible for installment agreements?

Yes. The Department of Revenue generally allows installment agreements for all the taxes they collect.

Sources:
https://revenue.support.tn.gov/hc/en-us/sections/115001423586-Payment-Plans
https://revenue.support.tn.gov/hc/en-us/articles/360059485531-CS-Payment-Plans-1-How-to-Request-a-Payment-Plan
https://www.tn.gov/revenue/tax-resources/legal-resources/tax-rates-and-interest-rate.html
https://www.tn.gov/content/dam/tn/revenue/documents/tax_manuals/december-2024/Business-Tax-Manual.pdf
https://www.tn.gov/revenue/tax-resources/legal-resources/tax-manuals/sales-use-tax.html
https://www.tn.gov/revenue/tax-resources/compliance-information/tax-delinquencies.html
https://www.tn.gov/content/dam/tn/revenue/documents/forms/general/f0200501.pdf
https://tntap.tn.gov/eservices/_/#0
https://www.tn.gov/revenue/taxes.html