IRS Installment Agreement – Request Types, 9465 & Process
If you can’t pay your taxes right away but have enough assets and/or income to pay over time, an IRS installment agreement may be the right choice for you.
An installment agreement is one of the most common payment arrangements for people who owe back taxes to the IRS. If you are filing your tax return and you don’t have the full payment, you can even request a payment plan at the same time as you file your return. If you owe less than $100,000, it’s pretty easy to get an installment agreement.
Types of IRS Installment Agreements
The IRS offers different kinds of Installment Agreements. They all allow you to pay your tax debt in monthly installments. Here are the most common types of installment agreements. The links provide more details on specific requirements and how to file.
This is the simplest type of Installment Agreement. It is for individual taxpayers who owe $10,000 or less in income tax. That amount does not include penalties and interest.
This is for individuals who owe less than $100,000 in tax or for businesses that owe less than $25,000. Out-of-business sole proprietors with less than $100,000 in tax debt can also apply. Streamlined means you don’t have to share a lot of financial details. However, you have to set up payments to come directly out of your bank account or out of your paycheck.
Usually, this payment plan is for taxpayers who owe over $100,000. If you owe over $50,000 and don’t want to set up automatic payments, you can also apply for a financially verified installment agreement. For these plans, you have to verify your financial situation by submitting Form 433-F (Collection Information Statement). This form requires details about your income, assets, debts, and other personal finances. Filling out this form is complicated, and you may want to get professional tax help.
This installment agreement lets you pay less than you owe. Basically, the IRS allows you make monthly payments, but as the Statute of Limitations (CSED) occurs, portions of your debt expire. You don’t have to pay the expired amount with this agreement. This is rarely accepted, and you also have to make a full financial disclosure with Form 433-F.
In-Business Trust Fund Installment Agreements
An In-Business Trust Fund Installment Agreement is an installment agreement for unpaid trust fund taxes (payroll taxes). To qualify, your business must owe less than $25,000, and you must be able to pay off all the tax debt within 24 months. If you owe over $10,000, you have to set up automatic payments.
How to Apply for an Installment Agreement
To apply for an installment agreement, use Form 9465 (Installment Agreement Request). If you owe less than $50,000 (including penalties and interest), you can use the IRS’s Online Payment Agreement to apply. If you owe between $50,001 and $100,000, you can only apply online if you can pay off the debt in 120 days.
These numbers also apply to sole proprietors and independent contractors. If you have another type of business (corporation, LLC, etc.), you can only apply online if you owe less than $25,000.
Fees to Set Up IRS Installment Agreements
There are one-time fees for setting up installment agreements. As of 2017, the fees are the following amounts:
- Free to set up a short-term (120 days or less) payment agreement online.
- $31 to set up a long-term payment agreement online, if payments are direct debit.
- $149 to set up a long-term payment agreement online, if payments are not direct debit.
- $225 for installment agreements set up with Form 9465, in person, or over the phone.
- $107 for installment agreements paid with direct debit and set up with Form 9465, in person, or over the phone.
- $43 if you qualify for the low-income rate and you set up the installment agreement with Form 9465, in person, or over the phone. The IRS lets you know if you qualify for this special rate. The income your report on your tax return will determine the rate.
- $89 to restructure or reinstate an existing installment agreement.
What Happens After You Apply for an Installment Agreement
Usually, the IRS accepts or rejects your installment agreement request within 30 days. If you meet the requirements, the IRS automatically accepts guaranteed and streamlined installment agreements. To learn about the acceptance processes for the other types of agreements, check out the links above.
If you miss a payment or if you fall behind on other taxes that you owe, the IRS may terminate your installment agreement. However, in some cases, if you incur additional tax debt, you can roll those amounts into your existing installment agreement. The IRS only lets you do that if the new amounts don’t add much time or money to the agreement. Additionally, if the IRS finds out that you shared incorrect financial information on your application, the agency can also terminate your agreement.
Help to Set Up an IRS Installment Agreement
To get the best outcome when negotiating an installment agreement with the IRS, call 1-800-928-5035 or fill out the form on the right. That connects you to a tax professional who can help you decide on the best solution for your needs. The consultation is free.
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