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After filing your taxes, if you’re unable to pay your tax debt immediately because it’s beyond your means, the Internal Revenue Service (IRS) gives you the ability to enroll in an installment agreement. This allows you to repay your tax debt in monthly payments to lessen the financial burden.
If you pay your tax debt in full, you save on the fees and interest that are associated with an installment agreement. However, it is a relief for many of us to know that if we can’t make the payment in one lump sum, we have an alternative.
Before applying for an installment agreement, there are several steps you must take:
- File all of your required tax returns
- Consider other options for paying your tax debt, such as a loan or credit card, which may have lower interest/fees
- Determine the maximum amount that you’ll be able to pay each month
- Remember that any future tax refunds you receive will be applied to your current tax debt until you’ve paid it in full
Depending on how you plan on setting up your installment agreement, there are different fees required.
- If you sign up for a direct debit agreement, you pay a $52 fee.
- If you sign up for a standard agreement, otherwise known as a payroll deduction agreement, you pay a $120 fee.
- If your income is below a certain level, you pay a $43 fee.
Depending on how much you owe, there are different ways to apply for an installment agreement.
- If the total of your individual income tax, penalties, and interest is $50,000 or less, you can apply online, by calling the phone number on your bill or notice, or by mail (see below).
- If the total of your individual income tax, penalties, and interest exceeds $50,000, you will need to complete Form 433-F, Collection Information Statement in addition to Form 9465, Installment Agreement Request, both of which should be mailed to the IRS (only Form 9465 is required if you owe less than $50,000).
In order to keep your installment agreement account in good standing, you must:
- Pay at least the minimum monthly payment before or on its due date (which is made easier by enrolling in direct debit or payroll deductions!)
- Be sure to include your name, address, social security number, daytime phone number, tax year, and return type when you submit your payment
- File all of your required tax returns by their due dates
- Pay all of the taxes that you owe in full and on time (if you can’t make the payments, you have to contact the IRS to change your agreement)
- Continue to make all of your scheduled payments even if the IRS applies your refund to your account balance
- Make sure that your statement is sent to the correct address, and contact the IRS if you move.
