For many American taxpayers, April 15 is the worst day of the year. Beyond the drudgery of filling out forms and assembling documentation, these individuals know that they will have to write a big check to the Internal Revenue Service (IRS). So what happens if you owe more in taxes than you can pay on Tax Day?
Fortunately, the IRS offers a program that allows taxpayers to pay their taxes off with monthly installments, instead of in one lump sum. If you are unable to pay your taxes at once, then you can choose to file IRS Form 9465 to set up an installment plan. This type of plan has many benefits – but you will continue to accrue penalties and interest while paying off your tax debt.
Owing taxes can be incredibly stressful. Form 9465 offers a way to ensure that you can pay your taxes over time, rather than risk IRS penalties for failure to pay. If you are concerned about your tax debt or have questions about installment plans, reach out to an IRS tax attorney today.
Who Is Eligible to File Form 9465?
Taxpayers who are unable to pay their taxes in full can file IRS Form 9465 to set up a monthly installment payment plan. However, to qualify for an installment plan with the IRS, you must meet certain requirements.
If you owe $10,000 or less, your installment payment plan will automatically be approved if:
- You have filed all of your past tax returns;
- You have not entered into an installment payment agreement within the past 5 years;
- You are unable to pay your tax liability in full when it is due; and
- You can pay off the entire outstanding balance within 3 years.
For these taxpayers, Form 9465 can be filed electronically along with your tax return. This is known as a guaranteed installment agreement. Alternatively, taxpayers who owe $50,000 or less in outstanding taxes can complete an online payment agreement (OPA) with the IRS instead.
However, if you owe more than $50,000, you will need to file a completed IRS Form 9465 on paper with your original signature. To do so, you will need to attach the form to the front of your tax return at the time of filing, or on its own at any time. In addition, you will need to file Form 433-F: Collection Information Statement on paper.
If you are currently making payments under an IRS installment agreement, you are not eligible to use Form 9465. Instead, you must contact the IRS directly to make arrangements to pay additional amounts of taxes due. Similarly, if you are currently in bankruptcy proceedings or if the IRS has accepted an offer-in-compromise for your tax debt, you should not file this form.
How to Set Up an Installment Plan
Once you file Form 9465, the IRS will typically inform you within 30 days if it is approved or denied. If the request is approved, then the IRS will send a notice that contains the terms of the agreement and which requests a user fee.
There are several ways that you can choose to pay off your tax debt through an installment plan. You can send a personal check, cashier’s check, or money order to the IRS through the mail. You may also have the IRS take the money directly out of your bank account or pay by credit card. No matter which payment method you choose, you will need to make the payment by the date specified in the agreement each month.
Importantly, when you sign up for an IRS installment agreement, you agree not only to make your monthly payments on time but to meet all future tax obligations. This means that you must withhold enough from your paychecks or pay estimated taxes so that your tax obligation is paid in full in the future. If you are eligible for a refund before you have finished paying off your tax debt, it will be applied to any outstanding balance.
Depending on how much you owe to the IRS, payments must be completed within 72 months 6 years – or less. To pay for this service, the IRS charges a one-time setup fee based on how you choose to pay your tax liability. This amount ranges from $31 for an online payment agreement and pay via direct debit to $225 if you do not set up an online payment agreement and pay via direct debit. This fee may be waived or reduced for lower-income taxpayers.
When you fill out Form 9465, you will need to select a payment amount that you can reasonably make each month. Defaulting on your installment plan can lead to serious consequences. The installment agreement will be terminated if you do not come into compliance, and the IRS may issue a levy or lien on the full amount due.
Keep in mind that the IRS will continue to charge interest on the amount that you owe, plus a failure-to-pay penalty on the unpaid balance. As such, interest and penalties will continue to accrue on your tax debt while you are making payments on the installment plan. This is a significant downside of an installment plan – and an incentive to pay off your tax debt as quickly as possible.
The main benefit of an IRS installment plan is that it gives taxpayers more time to pay off their federal taxes, avoiding IRS collection efforts or additional penalties and interest for failure to pay your taxes. While it can result in paying a fair amount in interest and penalties over time, if you cannot pay the full amount of taxes due, it may be the best option for you as a taxpayer.
Can a Business File IRS Form 9465?
No. IRS Form 9465 is only available to individual taxpayers. However, there are options available for businesses that are unable to pay their tax liability in full on April 15.
First, if your company owes $25,000 or less in business taxes, you can apply for an in-business trust fund express installment agreement. If your business owes more than $25,000 in taxes, you can also make a lump sum payment to reduce your tax liability to $25,000 and qualify for this type of agreement.
Second, if your business owes less than $50,000, you may choose the streamlined business IRS payment plan. This type of installment agreement will require you to pay the IRS in full within 6 years.
Third, if your company owes more than $50,000, you can request a regular routine business IRS payment plan. With this type of plan, the IRS will determine how much it thinks your business can afford to pay each month.
Fourth, for any amount owed, your business may be eligible for a partial business IRS payment plan. As with the regular routine business IRS payment plan, the IRS will determine how much you can afford to pay each month.
Business tax repayment plans are complicated, and there may be other options to pursue. If your company owes taxes that it is unable to pay, reach out to an IRS payment plan attorney as soon as possible.
What If I Can Pay in Full within 120 Days?
If you can pay the full amount of your tax liability within 120 days, you should not file Form 9465. Instead, you should apply for a short-term payment plan using the online payment agreement application available on the IRS website. This helps you avoid the fees associated with setting up an installment agreement. It can also help you avoid having to pay the penalties and interest that would otherwise accumulate with a longer-term payment plan.
Do I Need a Tax Lawyer to file an IRS Form 9465?
It depends on your specific situation. If you owe less than $10,000 and qualify for a guaranteed installment agreement, then you probably don’t need the help of an attorney. Under federal law, this type of agreement is guaranteed, so in most situations, paying a lawyer doesn’t make much sense.
However, if you don’t qualify for a guaranteed installment agreement — based on the amount of money that you owe ($50,000 or less) or for another reason — then you may need to seek a streamlined payment plan. These types of installment plans aren’t as complicated as other IRS plans, but certain issues may still arise. You may choose to hire a tax lawyer in this situation to ensure that your tax issues are fully addressed.
Finally, if you owe more than $100,000 in taxes or are unable to pay off your tax debt within the time frame specified by the IRS, then you may need a negotiated IRS payment plan. Here, it is incredibly important to hire a tax attorney who can fill out the proper forms, assist you with gathering documentation, and negotiate a favorable plan for you.
Interested in an IRS Installment Plan? Reach Out Today.
For many taxpayers, particularly entrepreneurs and the self-employed, it can be difficult to pay your taxes in full on Tax Day. If you are struggling to pay your taxes in one lump sum, an installment payment through Form 9465 may be a good option for you. If you qualify, you can pay off your tax debt over time and avoid an IRS collection process.
At Paladini Law, we are skilled at negotiating installment plans that work for our clients. We understand that it is all too easy to get behind on your taxes, and we are here to help. To learn more or to schedule a consultation with an IRS payment plan attorney, call us at 201-381-4472, or fill out our online contact form.
