Form 9465 is what you need to fill out for your installment agreement request. The IRS will look over and review your request but don’t be deterred if your first request gets shot down. You are in a negotiation, so fight your corner and only meet an installment agreement that doesn’t put you in financial peril.

It’s also a good idea to research what the statute of limitations is on the collection of your debt. This is so you know when the IRS can no longer chase you for the money you owe and what the IRS will more than likely disagree with regard to your request.

 

What If You Can’t Pay What You Owe?

The IRS would rather collect something than nothing at all or pressing the collateral collection button. Form 433-A is for the partial payment installment agreement, designed for those that simply cannot pay their tax debt in full. It’s the Collection Information Statement which you use to put forward your case as to why you think you qualify for the PPIA.

You must owe the IRS at least $10,000, including any and all penalties as well as interest. You cannot be in bankruptcy and you cannot have an offer in compromise accepted by the IRS before any and all your assets will be taken into consideration. You must have a good reason for why your assets cannot be liquidated. If the assets wouldn’t sufficiently cover your tax debt, this is a valid reason. If selling your assets would create immense financial difficulty such as being made homeless or without a job, then the IRS will understand. If your assets are jointly owned with a spouse and they are not willing to sell them, then again, this will be taken into consideration.

 

Which Route Should You Take?

This is where it gets difficult. In an all-too-predictable manner, it depends on your circumstances. If you owe a tax debt, chances are that you still have a lot of that money that you didn’t pay. You may have paid too little, so you ended up with extra money which you probably just left in your bank account. Maybe you forgot to pay and used the money you were going to pay. The circumstances vary but as a general rule of thumb, ask yourself these questions before you make your mind up.

  • Are you capable of making it short and sweet? In other words, do you have the funds and the stability in your living standards, to make large payments in less than 3 months?
  • Would you rather take more time to get yourself into a financial position, which doesn’t jeopardize your living standards? This might be needed if you’re behind on bill payments, have outstanding medical bills or medical bills in the near future, need to make car payments or paying child support, etc.
  • If it’s simply too much, are you willing to sell some of your assets in order to reduce the overall debt? This will allow you to qualify for PPIA, which is not agreed to easily by the IRS. You will have to make some heavy sacrifices but you will be given breathing room in the short and long-term. 

 

What are the types of plans?

There are two main types of plans:

  • Short-term: If you can clear your tax debt in 120 days or less
  • Only individual taxpayers can apply online for a short-term plan.
  • Only individuals may use their checking or savings account to make payments via Direct Pay on the IRS website.
  • You can pay online or via smart phone by using the Electronic Federal Tax Payment System. The EFTPS has a voice response system that you can call to make a payment.

 

Temporary Relief

You never know what kind of pitch life is going to serve you next. If it’s a curveball, then you may want to apply for a temporary delay in the collection process. This can only be done after you have applied for either a short-term, long-term, or PPIA plan. The IRS will also need you to fill out one or all of the following Collection Information Statement forms; 433-F, 433-A, 433-B. You will also need to provide proof of your current financial status. The IRS will need to know why you are unable to make any form of payment at all, until further in the future. IRS Tax Payment plans impacted by coronavirus are also considered.

Your monthly income, the current value of assets and your monthly expenses will all be studied. A delay from collecting is a big setback for the IRS as they are against the clock. Therefore, any attempt at falsifying your financial status will be met with increased penalties and interest on your tax debt. The IRS may also file a Notice of Federal Tax Lien which will prevent you from selling your assets and protects the government’s interests. Essentially, they will need some kind of safety parachute and it will more than likely be your home, car, other property, or business.

 

IRS Payment Plans: In Conclusion

Plan type Eligibility Payment options Costs

Short-term • 120 days or less.

  • Owe less than $100,000 • Direct Pay (via checking / savings account).
  • EFTPS (via debit / credit card / phone). $0

 

Apply in-person, online, mail or by phone.

Long-term • 120 days or more.

  • Owe $50,000 or less. • DDIA (via direct debit)
  • Direct Pay (via savings or checking account)
  • EFTPS (via electronic online transfer or phone)
  • Online (via debit/credit card)
  • Mail (check or money order) Option A

 

$31 ( applying online )

 

$107 ( applying via phone, mail or in-person )

 

Option B

$149 ( applying online ) 

$225 ( applying via phone, mail or in-person ) 

$43 ( Low Income status )

PPIA • Owe minimum of $10,000

  • Cannot liquidate assets as collateral, with valid reasons. • EFTPS (via debit / credit card / phone)
  • Direct Pay (via savings or checking account)

 

IRS payment plans allow you to quickly grab a hold of what could turn into a runaway train. You and the IRS acknowledge the situation and your circumstances. This allows both parties to work together and resolve the issue of your tax debt. You will be prevented from incurring further penalties and increases in interest. You will also prevent your assets from being used as collateral payment and possible legal action.