Understanding Installment Agreements with the IRS

When you owe a large debt or a tax liability to the IRS, it can feel very daunting, especially if you can’t pay what you owe all at once. Fortunately, the IRS deals with situations like this every day, and it has options in place to make it possible for taxpayers to more easily pay what they owe.  

Most often, the IRS will grant a monthly payment plan to make tax debts easier and more manageable to pay. These plans, also known as payment arrangements, are helpful to the tax payer. However, they do come with interest and penalties for late payments, so that’s something to be aware of.

If, regardless of the consequences, a payment plan is still your best option, you will simply need to fill out Form 9465 to request an installment agreement. If you’re unsure of whether you need an agreement or have questions about the form itself, you can contact the IRS or a tax professional for assistance.

Automatic Agreement

Often, taxpayers are very worried about whether or not their request for an installment agreement will be granted. However, that worry is often needless.

Generally, if you owe $10,000 or less, the IRS will perform a guaranteed acceptance of your installment plan. However, there are a few other criteria that you must meet. These include:

l  Not having filed your tax returns late in the last five years

l  Not having paid your taxes late in the last five years

l  Having filed all required tax returns

l  Agreeing to file all taxes on time in the coming years

l  Agreeing to pay all tax payments on time in the coming years

If you do not or cannot meet this criteria, don’t panic. Work with the IRS or your financial advisor to see what other options you have. Generally, the IRS does not want to make it hard for you to pay your debts and will work with you as long as you work with them!