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IRS Payment Plans Tips
Automatic IRS Installment Plan
If you owe less than $25,000 in unpaid taxes, you automatically qualify for an installment program arrangement. You simply need to use IRS Form 9465 to make your proposal.
There is one stipulation, however. In order to get the IRS automatic installment payment plan, you must be able to pay your unpaid tax bill within 36 months from the date of your request. Plus, your monthly payments must be of equal amounts.
While involved in the automatic installment payment program, your unpaid tax bill will still be accruing interest and penalties.
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How To Make Tax Payments On Your Payment Plan
DebtHelp.com Tip: When you become involved in an IRS payment plan, you have options available to make your monthly payments. In general, they are the same methods of payments available if you were simply paying your ‘regular’ taxes.
Paper. The IRS will accept your check, money order, or cashier’s check payable to the U.S.Department of Treasury. Be sure to put the tax year, tax form, and your taxpayer identification number in the memo section. Send it along with the applicable payment voucher, if needed.
Cash. Only make cash payments on your IRS payment plan at your local IRS branch office. Be sure to get a receipt. Do not mail cash.
Credit card. If you decide to pay by credit card, you have two options. Know, however, that each option will involve a convenience fee. Remember to add this amount into the final amount you are paying on your payment plan. Your two options are:
1) Official Payment Corporation (officialpayments.com) online. They also can be reached via phone at 1-800-2PAYTAX (1-800-272-9829).
2) Link2Gov via online at pay1040.com. Or, call them at1-888-PAY1040 (1-888-729-1040) to make a tax payment.
One of the easiest ways to make a tax payment on your IRS payment plan is by using EFTPS (Electronic Federal tax Payment System. Operated by the United State’s Department of Treasury, this payment method involves a direct debit from your bank account. You can use this system 24 hours a day, 7 days a week. It is secure, safe, and easy to use. You simply sign up for it online through a link found on the IRS website.
Once you have been approved for an EFTPS account, you can pay your taxes online through the website of eftps.gov. Or, you can call 1-800-555-4477.
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Documents Needed
Many times when you attempt to enter into an IRS payment plan, it is recommended that you have certain information available with you. The more information you have available, the quicker the application process will be.
Income. Have available any W-2, wage statements, or income statements from your business.
Assets. Have a listing of all your assets. Schedules, financial statements, receipts, and cancelled checks will do fine.
Expenses. Monthly living expenses will be needed to give the IRS an idea about how much is needed in the repayment calculation figure. Be certain you know the total of your monthly living expenses. This is the figure that you need to live, without any extravagance. Rent, mortgage payments, utilities, and similar expenses are considered part of the monthly living expenses.
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IRS Tax Installment Agreement
DebtHelp.com Tip: Once you have been approved for IRS Installment Agreement plan, you will be mailed a hard copy of the form. This installment agreement will contain:
Your total tax bill, tax period, and type of tax form it applies to
Your name, address, and taxpayer identification number
Total amount of your unpaid tax bill obligations
Agreed upon monthly payment amount
Date you agreed upon to make your payments
You will receive two hard copies of the IRS Installment Tax Agreement. Be sure to sign one copy and return it to the IRS at the address listed in the Agreement. Keep one copy for your records.
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Drawback to IRS Installment Plans
The main drawback to entering into an installment agreement is the fact that interest and penalties still accrue on your unpaid tax bill.
The consequence of having a large unpaid tax bill combined with making small monthly installment payments is a larger tax bill.
On average, the IRS interest and penalties have a combined rate of anywhere from 9-12% per year. This can easily add up.
It is very frustrating to make monthly installment payments and see your IRS tax bill increasing. This is another reason to increase your monthly installment payment or to pay your tax bill in full.
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Requesting an IRS Payment Plan
When you realize that you are unable to pay your unpaid tax bill in full, you have contact the IRS and request becoming involved in their installment payment program. You can do this by calling them or mailing them.
Phone. You can call the IRS at 800-829-1040 to request an installment agreement. The IRS agent will help you, but needs to know the following:
your social security number (or taxpayer identification number),
what tax year you are calling about
what tax form you used to report your taxes (from the 1040 series)
what monthly amount you can afford
how you want to make your payment (check, direct debit, etc.)
The IRS agent will update your file with the information discussed. Then, you will be told when your first payment is due.
You then will receive the installment agreement you entered into in the mail, along with a payment voucher. Fill it out completely and send it back to the IRS.
Once your installment agreement is set up in the IRS system, you can change your method of payment through the IRS website or by phone.
Online. You can go online to the IRS website and request an Installment Arrangement.
Mail. You also have the option of preparing and submitting IRS Form 9465 (Installment Agreement Request) by mail. If you choose the mail method, you also need to send the IRS your most recent 1040 series tax form (the one that your unpaid taxes come from). You will need to enclose a check for the amount you can afford on your back taxes.
Once the IRS receives your Form 9465, they will review it and make a determination. When they make a determination as to whether or not to accept your request, you will receive an IRS Notice stating this determination.
When you request an installment agreement, you need to know that there is a $43 fee for this service. This amount will be deducted from your first payment. Remember that even though you may enter into an installment arrangement with the IRS, you will be assessed interest on your unpaid tax liability.
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Falling Behind
Be sure that if you are unable to make your monthly installment payment, that you contact the IRS. Explain to them why you are unable to make the payment and request that the installment agreement not be defaulted. They may be able to work with you.
If you do not contact the IRS when you know you are having problems making your installment payments, they may void the agreement and seize your assets.
This is especially true if you are paying any delinquent payroll taxes. The IRS does not take lightly when businesses owe these taxes.
If your installment agreement is cancelled, there may be an additional fee to reinstate it.
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IRS Installment Form
IRS Form 9465, Request for Installment Payments will be needed to start the process of requesting an installment agreement for your back taxes.
You can obtain this form by calling the IRS at 1-800-829-1040. Or, you can go online to their website and order it. If it is easier for you, once you are visiting the IRS website, you can easily just print out the form.
Even though it is not required that you prepare and submit a Form 9465, it is recommended.
