Editor’s Note: This post was originally published in March 2013 and has been updated for accuracy and comprehensiveness.
If you find yourself owing a lot of money to the IRS, you're not alone. But what can you do if you won't have the money you need to pay off your tax bill? One solution is to set up an IRS installment plan. These plans make it possible to pay off your tax balance over time, rather than all at once.
What is an IRS Payment Plan?
How does an IRS payment plan work? An IRS payment plan, also known as an installment agreement, is an arrangement between you and the IRS that outlines how you'll pay off your tax debt over time. It allows you to make monthly payments toward your taxes owed instead of paying the full amount all at once. This option gives you some financial flexibility and helps you avoid penalties and interest you might be hit with if you have unpaid taxes. Within certain guidelines, you can decide when you'd like to make payments and how much you'd like to send in each month. Though you get to choose the amount, it must be enough to pay off your balance in full within three years.
How to Request a Payment Plan from the IRS
You've decided you want to set up a payment plan with the IRS, but what do you do next? If you owe less than $50,000 in taxes and have filed all of your returns, you can apply for an installment agreement online with lower fees. You will be notified immediately whether your payment plan has been approved or not.
You may also submit your tax return electronically with Form 9465, Installment Agreement Request. When you complete Form 9465, you'll be required to provide some personal information. You'll also have to enter the amount you'd like to pay on your balance each month.
If you'll be hiring a tax professional to prepare the forms for you, they can help you either apply online or fill out Form 9465 on your behalf and help you prepare it for submission.
Taking Care of Large Debts with an IRS Payment Plan
While the vast majority of taxpayers can request a payment plan online or with their e-filed tax returns, some may not be able to do so. For example, if you owe more than $250,000 in tax debt, you'll have to request your installment plan in writing by completing Form 433-F in addition to Form 9465 in order to get your request approved by the IRS. As with the smaller debts, you'll have to set up a plan that allows you to pay off your balance in full in no more than three years.
Do you owe a balance to the IRS that will be difficult for you to pay in one lump sum? Consider signing up for an IRS payment plan to take care of your tax debt. Applying for a payment plan will allow you to address your tax debt more comfortably over a period of time so you can have peace of mind. Get in touch with our team of tax experts with over 25 years experience negotiating with the IRS to help people just like you find a way out of tax debt.
