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How to Get an IRS Installment Agreement for Back Taxes
Contents
- 1 How to Get an IRS Installment Agreement for Back Taxes
- 1.1 What is an IRS Installment Agreement?
- 1.2 How Do I Apply for an Installment Agreement?
- 1.3 What Do I Need to Apply?
- 1.4 How Much Will My Monthly Payments Be?
- 1.5 How Long Do I Have to Pay Off My Balance?
- 1.6 What Happens After I Apply?
- 1.7 Can the IRS Reject My Installment Agreement Request?
- 1.8 What Happens if I Miss a Payment?
- 1.9 Are There Payment Plan Options for Low-Income Taxpayers?
- 1.10 Should I Work With a Tax Professional?
- 1.11 What if I Just Can’t Afford an Installment Agreement?
- 1.12 The Bottom Line
How to Get an IRS Installment Agreement for Back Taxes
Getting behind on your taxes can be super stressful. The letters from the IRS can seem really intimidating. But don’t panic! Setting up an installment agreement with the IRS is usually pretty straightforward. This allows you to pay off your tax debt over time in monthly payments. Here’s what you need to know:
What is an IRS Installment Agreement?
An installment agreement is basically a payment plan you set up with the IRS to pay your back taxes over time. Instead of paying the full amount all at once (which most people can’t afford!), you make smaller monthly payments until your balance is paid off.
The IRS offers short-term payment plans (pay off in 120 days or less) and long-term payment plans (pay off in over 120 days). With a long-term plan, the IRS will charge a setup fee, but the monthly payments are lower so it’s easier on your budget.
How Do I Apply for an Installment Agreement?
The easiest way to apply is using the IRS Online Payment Agreement system. You can set up a new agreement or revise an existing one. It’s fast, secure, and you get immediate approval on whether you qualify.
You can also submit a Form 9465 Installment Agreement Request by mail. This takes longer to process. I’d recommend the online application if possible.
What Do I Need to Apply?
To set up an installment agreement, you’ll need:
- Your Social Security Number or Individual Tax ID Number
- Your filing status (single, married filing jointly, etc.)
- A copy of your most recent tax return
- Details on how much you owe
- Your bank account & routing numbers (for automatic withdrawals)
Make sure you enter everything correctly! Any small mistake could delay processing your request.
How Much Will My Monthly Payments Be?
The IRS will calculate your monthly payment amount based on how much you owe and your ability to pay. They want the payments to be manageable for your financial situation.
If you owe $25,000 or less, the monthly payments are usually around $100-$200. For balances over $25,000, you may qualify for a “partial pay” installment agreement with smaller monthly payments.
How Long Do I Have to Pay Off My Balance?
The IRS offers short-term (120 days or less) and long-term (over 120 days) installment agreements. With a long-term plan, you generally have up to 72 months (6 years) to pay off your tax debt. However, the IRS may approve a longer timeframe if you can show financial hardship.
What Happens After I Apply?
If you use the Online Payment Agreement system, you’ll get immediate notification on whether your payment plan was approved. If submitting Form 9465 by mail, it can take 2-3 weeks to get a response from the IRS.
Once approved, the IRS will send you a confirmation letter detailing your monthly payment amount and due dates. They will also begin automatically withdrawing each payment from your bank account on the date specified.
Can the IRS Reject My Installment Agreement Request?
Unfortunately yes, the IRS can reject your request if:
- You don’t provide all required information
- You’re not current on filing tax returns
- You miss payments on an existing installment plan
- The IRS believes your assets exceed your liabilities
Basically, the IRS wants to see you’re acting in good faith and doing your best to comply. If they reject your request, you can appeal the decision or correct any issues and reapply. Don’t just ignore it!
What Happens if I Miss a Payment?
It’s essential to make your monthly payments on time. If you miss a payment, the IRS will send you a default notice. You’ll have 30 days to pay the missed amount + fees.
If you continue to miss payments, the IRS can cancel your agreement, accelerate your balance, and begin collection actions like wage garnishment or property liens. You really want to avoid this!
Are There Payment Plan Options for Low-Income Taxpayers?
Yes! The IRS understands not everyone can afford the monthly payments under a regular installment agreement. So they offer help for taxpayers with lower incomes:
- Guaranteed Installment Agreements: If you owe $10,000 or less, the IRS will approve a monthly payment plan without verifying your ability to pay.
- Streamlined Installment Agreements: If you owe $25,000 or less, the IRS will approve an agreement without requiring detailed financial information.
- Partial Pay Installment Agreements: If you can’t afford regular monthly payments, the IRS may approve a smaller “partial pay” amount.
These options make it easier for low-income taxpayers to get approved and avoid collection actions.
Should I Work With a Tax Professional?
Getting help from a tax pro can make the process smoother. They can ensure you submit everything correctly and negotiate with the IRS on your behalf. This is especially helpful if your tax situation is complicated.
Look for an Enrolled Agent (EA) or Certified Public Accountant (CPA) who specializes in tax debt resolution. Make sure they have a Preparer Tax Identification Number (PTIN) which means they’re authorized to represent clients before the IRS.
What if I Just Can’t Afford an Installment Agreement?
If your income is so low that even small monthly payments would be a hardship, you may qualify to get your tax debt written off by the IRS.
You’d need to show you have high expenses relative to income, and that your assets are low. The IRS may agree to Currently Not Collectible status, meaning they won’t pursue collection on your debt.
Or in very limited cases, you may qualify for an Offer in Compromise, which allows settling tax debt for less than the full amount owed.
These options require detailed financial disclosure. A tax pro can help navigate the process.
The Bottom Line
Setting up an IRS installment agreement takes some legwork upfront. But once approved, you get affordable monthly payments and peace of mind that your tax debt will be resolved.
Just be sure to get everything submitted correctly, make your payments on time every month, and reach out for help if you need it. Taking action quickly is key to avoiding IRS collection efforts down the road.
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