Washington D.C. OTR Payment Plans (Installment Agreements) for Back Taxes

 

Behind on income tax, sales tax, franchise tax, or other taxes in Washington, D.C.? Then, consider looking into a payment plan. The D.C. Office of Tax and Revenue (OTR) offers generous payment plans to individuals and businesses who've fallen behind on their tax obligations. 

To get help applying and to ensure this is the best option for your situation, reach out to a tax professional today. Using TaxCure, you can search for pros who have dedicated experience with your specific tax problem. 

Key takeaways

• The OTR offers payment plans to individuals and businesses. 
• You'll generally get approved if you owe under $100,000 and can pay off the balance within 48 months. 
• If you owe over $100,000 or need more than 48 months to pay, you must submit a financial statement.
• Setting up payments stops aggressive collection actions. 
• You must stay compliant with filing and paying taxes to keep the plan in good standing.

How to apply for a payment plan on D.C. taxes

To apply for payments, reach out to the Collection and Enforcement Administration (CEA) as follows:

• Apply online at MyTax.DC.gov – you may need to set up an online account or verify your identity with information from a notice or a recently filed return.
• Call the CEA – Call (202) 724-5045 to request payments. Have your ID and a recently filed return on hand in case you need to verify your identity.
• Work with a CEA rep – If a CEA rep has been assigned to your case, you can ask for a payment plan from them directly. 

As long as you owe under $100,000 and can pay off the balance within 48 months, you don't have to complete a paper application – in fact, there is no paper application for a standard installment agreement on Washington D.C. taxes. 

However, if you owe over $100,000 and/or need more than 48 months to pay, you must complete a collection information statement. Use Form PA-1 for individuals and Form PA-2 for businesses. These forms ask detailed questions about your finances, including your income, expenses, assets, and liabilities on the business or personal level. The OTR has links to those tax forms on its website.

The OTR uses your financial information for two main reasons:

1. To determine that you can't pay in full, if your statement indicates that you could pay in full or make larger payments to pay off the balance within 48 years, the Division may require you to do that. They want to be paid as quickly as possible.
2. To make sure you're making the largest payments possible, if the Division agrees to give you more than 48 months to pay, they'll want to ensure that you're making the largest payments possible to pay off the debt as soon as possible. 

You also need to attach your latest federal tax returns for yourself or your business to the financial statements if required.

Eliqibiity requirements for payment plans

In addition to going through the application process explained above, you must also meet the following requirements:

• Up-to-date on filing requirements – you must have all of your District tax returns filed. If you've been behind for years, the OTR may only make you file five or six years of returns, but that depends on the situation. 
• Current on other tax payments – Aside from the tax you're putting into an installment agreement, you must be up-to-date on your payment requirements. 
• Not incurring new tax debt – if you're self-employed or a business owner, you must ensure that you're making quarterly estimated payments on time and in full. If you're employed, you may need to adjust your withholding to ensure you're paying the optimal amount of tax. 

What to expect when you're on a payment plan

While you're on a payment plan, expect the following:

• Interest – will continue to accrue on the balance due for the duration of the plan.
• Loss of refunds – if you earn any refunds from the OTR or the IRS, the OTR will keep your refund and apply it to your tax debt.
• Risk of default – the plan will go into default if you miss a payment or incur new tax debt. Although you may get a chance to fix the situation, the OTR may also rescind the plan, demand payment in full, and move forward with involuntary collection actions. 
• No collection actions – while you're on a payment plan, the OTR will not move forward with any involuntary collection actions. 

As long as you make your payments on time, you shouldn't need to worry about any additional complications. To ensure you make timely payments, consider setting up automatic debits from your bank account when you create your payment plan.

How a tax professional can help

A tax professional can help ensure that a payment plan is the best option for your situation – if not, they'll help you explore other options, such as offers in compromise or a hardship pause on collections. An experienced tax pro will customize their approach based on your situation, and depending on the specifics, they may help you with the following:

• Requesting penalty relief – the Division will waive penalties for filing and paying late if you have reasonable cause (i.e., there was a reason out of your control that prevented you from paying or filing on time). A tax pro may be able to help you get rid of penalties to reduce the overall amount you owe. 
• Helping with collection actions – if you're already facing unwanted collection actions, such as tax liens, wage garnishments, or other involuntary collection actions, the pro can help you address those problems and then apply for monthly payments. 
• Protecting your business – if you owe back taxes, the OTR can take away your sales tax license and potentially other business licenses or permits as well. Your tax pro can intercede before this happens.
• Appealing incorrect assessments – if the amount the OTR believes you owe is incorrect, your tax pro can help you appeal the assessment. The exact steps vary based on where you are in the assessment process.
• Reviewing other options – a payment plan isn't the right option for everyone. Your tax pro will review your situation and make sure that you shouldn't apply for any other programs. 
• Handling communication on your behalf – once you have a tax pro, you don't have to worry about OTR notices or phone calls. Instead, you can have the tax pro handle all communication and negotiations for you. 
• Dealing with denials – if the OTR rejects your request for a payment plan, the tax pro will be able to help you appeal or take other steps to resolve your tax due. 

Like all state tax agencies, the OTR has unique collection processes and procedures. That's why it's critical to work with a professional who has experience in this area with this agency. Working with a big tax relief firm will generally not get you the best results, especially when you're dealing with state or local taxes. 

FAQs

What are the benefits of OTR payment plans?

Being on a payment plan lets you avoid collection actions, pay off your balance over time, and keeps you in good standing with the OTR. If you're behind on D.C. taxes and can't afford to pay in full, this option protects you while also helping you get back into compliance. 

What are the drawbacks of an OTR payment plan?

Interest will accrue on your account, so ultimately you'll pay more total than if you paid in full upfront. Also, you'll lose out on tax refunds for the duration of the plan – you won't lose the refunds, as they'll be applied to your debt, but you won't get that cash infusion at tax time as usual.

Who can apply for an OTR payment plan?

Any individual or business that owes taxes to the OTR can request to set up a payment plan. 

Will the OTR file a tax lien if I set up a payment plan?

According to the OTR website, they file liens on a case-by-case basis if you set up payments. The chances of having a lien filed increase the more you owe and the longer you take to set up payments. For example, if you proactively set up payments on a small balance, the OTR may not file a lien. If you wait a long time to set up payments, they may file a lien before you reach out to them. However, if you owe a significant balance, they may file a lien to secure their interests, whether you set up payments or not. 

What if I can't afford a payment plan?

If you can't afford a payment plan, you may want to look into an OTR offer in compromise, where you settle the debt for less than owed. To get a settlement, you typically must prove that you're paying the most you can afford.

Find Help With OTR Back Taxes Now

If you owe taxes in D.C., you need to work with a professional who has experience with the OTR. They know the resolution options, how to apply, and the best ways to deal with OTR reps. But how do you find help? TaxCure makes it easy – learn more about why to use TaxCure. 

Start your search using the search box, and then filter the results so that you only see pros who have experience with the OTR You can narrow down the results even further based on the type of tax you owe, the solution you want (in this case, that's a payment plan), or any problems you're having (for example, if you're facing a tax lien). Then, review your options and reach out to pros individually to see if they're the right fit for your needs.