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Guide to IRS Form 9465: Installment Agreement Request

Guide to IRS Form 9465: Installment Agreement Request

As a taxpayer, there may be times when you find yourself unable to pay your tax bill in full.

The IRS understands that this can happen and has created a solution for such situations - the IRS Form 9465, or the Installment Agreement Request. This form allows taxpayers to request a monthly payment plan to pay off their tax debt over time.

In this article, we will delve into the details of Form 9465, its eligibility criteria, the process of filing it, and other important considerations.

What is Form 9465?

Form 9465 is an IRS form used by taxpayers who cannot pay their entire tax obligation in a lump sum and wish to set up a monthly installment payment plan.

This form is used to request the IRS to allow you to make monthly payments towards your tax debt.

NOTE! While you are on an installment plan, penalties and interest on the overdue balance will still accrue until you pay it off.

"Form 9465 is the 'Installment Agreement Request' form of the Department of the Treasury Internal Revenue Service. If you owe $50,000 or less, you may be able to avoid filing Form 9465 and establish an installment agreement online even if you haven't yet received a tax bill." - IRS

Eligibility Criteria: Who Can File

Before you can apply for an installment agreement using Form 9465, you must meet certain eligibility criteria. These criteria are set by the IRS to ensure that only those who genuinely need this facility can avail it.

1. Debt Amount

Taxpayers owing no more than $10,000 will have their installment payment plan application automatically approved with certain stipulations.

If you owe more than $50,000, you cannot file electronically and need to return a completed IRS Form 9465 on paper with original signatures.

Also, any taxpayer owing more than $50,000 must also submit Form 433-F: Collection Information Statement along with Form 9465.

2. Filing History

You must have filed all past tax returns.

3. Previous Installment Agreements

You should not have entered into an installment payment agreement in the past five years.

4. Ability to Pay

You must be unable to pay the taxes in full when due and be able to pay the entire outstanding balance within three years.

How to File Form 9465

Filing Form 9465 is a straightforward process, but it's important to know your options and choose the one that's best for your situation.

1. Online Application

If you owe $50,000 or less in taxes, penalties, and interest, you can avoid filing Form 9465 and complete an online payment agreement application instead. This can be done on the IRS website.

2. Paper Application

If you owe more than $50,000, you will need to file a paper application. Complete Form 9465 and Form 433-F (if applicable) and mail them to the IRS.

3. Filing with Tax Return

You can also file Form 9465 with your tax return.
 

Form 9465 preview

 

 

Fees, Penalties, and Interest

Understanding the financial implications of setting up an installment agreement is crucial to making an informed decision.

Setup Fee

There is a one-time setup fee for establishing an installment plan. The amount depends on how you pay.

For example, it's $31 if you set up an online payment agreement and make your payments by direct debit, and $225 if you don't set up an online payment agreement and don't make your payments by direct debit.

Penalties and Interest

The IRS charges a daily compounding interest rate equal to the short-term federal funds rate plus 3%, calculated on a quarterly basis.

In addition to the interest charged, the IRS will also assess a failure-to-pay penalty of 0.5% on the unpaid balance each month or part of a month up to a maximum of 25%.

For taxpayers who file on time and are on an installment plan, the penalty decreases to 0.25% for each month the installment plan is in effect.

Important Considerations

When entering into an installment agreement, there are several important considerations to keep in mind.

1. Default

If the agreement stipulates that the taxpayer must make the payment by a certain date each month and payment is not made, then the agreement is immediately considered to be in default.

2. Modifying Agreement

The IRS has upgraded its website to allow taxpayers to modify their installment agreements online.

Individuals can now revise their payment dates and even the terms of their agreement, including the method of payment and other details.

3. Benefits

The installment plan gives taxpayers more time to pay off their federal taxes in an orderly manner.

As long as the terms of the agreement are honored and the taxpayer is able to make their payments, any collection efforts by the IRS or private collection agencies will cease.

Bottom Line

Filing IRS Form 9465 is a viable option for taxpayers who find themselves unable to pay their tax bill in full. It is important to understand the eligibility criteria, fees, and penalties associated with setting up an installment agreement.

Additionally, taxpayers should be aware of the consequences of defaulting on the agreement and the options available for modifying the agreement if necessary.

Disclaimer: This article is for informational purposes only and should not be considered as tax or financial advice. Please consult a tax professional for personalized advice.

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Ines Zemelman, EA
Founder of TFX