IRS Installment Agreement: A Good Solution if You Can't Afford to Pay Your Taxes
Your taxes are due and you have no money to pay them. What should you do? No matter what, don’t go into panic mode. There are some surprisingly simple solutions, the primary one being an Installment Agreement, which is a monthly payment plan that you setup with the IRS to pay off your debt.
Follow these steps to apply for an Installment Agreement:
- Find out how much you owe. Call the IRS or refer to copies of your tax returns. The amount you owe in unpaid taxes includes your original tax due plus penalties and interest accrued since the filing deadline of April 15. Note: The IRS will not approve your installment agreement if you haven’t filed all of your tax returns yet. You will need to file all back taxes before requesting a monthly payment plan.
- Complete Form 9465, Installment Agreement Request. You can also use the Online Payment Agreement Application on the IRS website to set up a payment plan. You can also request it over the phone at 1-800-829-1040.
- Choose a day of the month you want to make your payments. You have to make your payment by the same day each and every month.
- Choose a minimum payment amount per month, which you must make every month. You can always pay more, so put the minimum amount that you know you can pay each month.
- Have patience (it will take longer for the IRS to respond to you if you send your Installment Agreement during tax season). The IRS should respond within 30 days. If they take longer than 30 days, resubmit the paperwork and/or hire a tax professional to assist you in the process.
- Make on-time payments every month. You can pay by check, credit card, money order, EFPTS, or automatic withdrawals from your checking account (you’ll need you checkbook or a voided check to set this up).
- A tax professional can help you set up a payment plan as well. This may be a good idea if you need to negotiate a lower monthly payment. You will need help from a tax professional if you do not meet the IRS's criteria for automatic acceptance of an installment agreement.
- If you are paying by check or money order, send your monthly payment to the IRS 7-10 days before the due date to allow for any mail delays. You want to ensure that the IRS receives your payment on time.
Alternate option: File a tax extension. You can extend the amount of time you have to file your tax returns. You'll need to file Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. Qualification requirements include:
- Owe less than $10,000 (including interest and penalties)
- Not be a business
- Have no other balances due to the IRS
Note: The IRS gives you plenty of time to file your tax return. So you're not going to have any excuses if you don't pay on time, apply for an installment agreement, and/or apply for a tax extension. Follow these steps if you know you will not be able to pay, and stay out of debt with the IRS.
If you would like additional information and assistance with your tax debt, you can get a free consultation to resolve delinquent taxes today!