Installment agreements If you can't pay all or some of the taxes you owe, you can apply for a long-term payment plan (installment agreement). The agreement allows you to pay the taxes you owe in monthly installments. To make a payment of the Arizona individual income tax due, taxpayers can do so electronically or by mail. Taxpayers who file their return electronically can authorize an electronic withdrawal of funds (direct debit) from a checking or savings account.
The payments accepted with this plan are more limited, with a single option called Direct Debit Payment Agreement (DDIA). If you already have a payment plan, you may also qualify to use the online payment plan option to review your current agreement. Changes you can make online include reviewing payment dates, payment amounts and bank information in installment agreements. No tax liability will be reported on a payment plan of six months or less, unless there is a default on the plan.
Under an IRS installment agreement, in addition to processing fees, you are charged interest at the current rate (adjusted quarterly) plus a late fee of 0.5% (0.25% for taxpayers who filed returns on time). In addition, taxpayers who have already filed tax returns and remitted their payments separately should not send a paper copy of a return with their payment. However, there are options to expand your payments to minimize the impact on your monthly budget. With this plan, you pay a fixed monthly amount through automatic withdrawals, similar to an installment loan.
If you can't pay your personal income tax bill in full, you should pay as much as possible when you file your return. Upon approval, the IRS is committed to allowing you to make monthly payments on your debt instead of paying it in full. Continue to send at least the amount of the monthly payment due using proof of payment plan or proof of billing. There's about a month left to file taxes on time and without penalty, and the April 18 deadline is just around the corner.