IRS Payment Plans Tips

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What if I fall behind in my tax payments?

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.

   
What are some documents needed for payment plans?

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.

   
What is an automatic IRS installment plan?

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.

   
How do I request an IRS Payment plan?

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.

   
What form do I need for requesting an IRS installment plan?

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.

   
What is the drawback to an IRS installment plan?

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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