How to Get on an IRS Installment Plan

If you owe more income tax than you can pay at once, you may be able to set up an IRS installment plan agreement with the Internal Revenue Service. While you will still incur interest fees and other penalties as you make payments on your IRS installment plan, it may be the best solution for you since you can make smaller, more manageable payments to the IRS.

How you go about setting up an IRS installment plan agreement depends on how much you owe the IRS, and how quickly you think you can pay them off. If you think you can pay your tax (including any penalties or interest charges) within 120 days, you can file for an extension by going to the IRS's website at irs.gov and accessing their Online Payment Agreement section, or by calling 800-829-1040. This may be a less expensive option than filing for an IRS Installment Plan Agreement.

If you cannot pay within 120 days, you can file for an IRS installment plan agreement. The forms that you complete depend on how much you owe and how quickly you can pay off your tax debt.

If you owe $25,000 or less, and can pay your balance (including interest payments, penalties and fees) within 60 months, you can complete an IRS Installment Plan Agreement Request on-line through the On-line Payment Agreement section on the IRS's website or by completing form 9465. In either case, the IRS allows you to determine the amount of your monthly payment. (Of course, you should pay as much as you can, so you can limit the interest and penalty fees you will be charged.)

You will be charged additional fees to file an IRS installment plan agreement request As of January 1st, 2007, the one-time set-up fee was $52 if you agreed to pay electronically, or $105 if you paid through other means (for instance by sending them a check every month). However, if you meet the IRS's low-income requirements, you will only be charged $43 regardless of how you pay. If at anytime you fail to make your payments, the IRS will charge $45 to reinstate the IRS installment agreement plan.

However, if you owe more than $25,000, or cannot pay your total tax debt within 60 months, the process to set up an IRS installment agreement becomes more complicated. In this case, fill out form 433-F, "Collection Information Statement," which asks you to determine your total assets, your monthly expenses and submit detailed records, including pay stubs and bank statements, supporting your claims. Based on this information, the IRS will determine your monthly payments for you.

If all of this sounds confusing, that's because it is, and it underscores why you should consider having a tax professional who knows the ins and outs of the IRS's complicated tax code. To find out how our tax professionals can help you set up an IRS installment agreement plan, or help you resolve other issues you may be experiencing with the IRS, simply complete the attached form. One of our professionals will gladly contact you to answer any questions you may have.