Written By: Vickie Richardson
Rather than contacting the IRS directly by phone, Form 9465 can be used to request a monthly installment payment plan if the taxpayer finds that they are unable to fully pay the amount listed on their tax return or on a notice issued by the IRS. Form 9465 can be submitted within 120 days of the tax return being filed.
Generally, the payment terms of the installment agreement are designed to fully pay the outstanding tax liability within 60 months or less. There are two “types” of agreements that fall into this category – Guaranteed Installment Agreement and Streamline Installment Agreement.
The Guaranteed Installment Agreement is used when the tax owed by the taxpayer is $10,000 or less and the following conditions are met:
• During the previous 5 tax years the taxpayer (and spouse if filing joint returns) have filed all income tax returns on time, paid any income tax due and have not previously entered into an Installment Agreement for the payment of outstanding income tax.
• The IRS determines that the taxpayer cannot pay the tax owed in full at the time it is due and the taxpayer must provide the IRS with the information needed to make that determination.
• The taxpayer agrees to fully pay the outstanding tax liability within 3 years and agrees to comply with all tax laws while the agreement is in effect.
The Streamline Installment Agreement is used when the tax owed by the taxpayer is $25,000 or less and the following conditions are met:
• During the previous 5 tax years the taxpayer (and spouse if filing joint returns) have filed all income tax returns on time, paid any income tax due and have not previously entered into an installment agreement for the payment of outstanding income tax.
• The IRS determines that the taxpayer cannot pay the tax owed in full at the time it is due and the taxpayer must provide the IRS with the information needed to make that determination.
• The taxpayer agrees to fully pay the outstanding tax liability within 5 years and agrees to comply with all tax laws while the agreement is in effect.
To complete the Form 9465, the taxpayer provides the following information
• Their name and their spouse’s name (if the filing status on the return is Married Filing Jointly)
• Their SSN and, if applicable, their spouse’s SSN
• Complete mailing address
• Home telephone number and best time to call
• Work telephone number and best time to call
• Bank name and mailing address
• Employer’s name and mailing address
• The total amount owed as shown on the tax return or IRS notice(s)
• The amount, if any, of the payment being submitted with the tax return or IRS notice(s)
• The monthly payment amount being requested.
• The day the taxpayer is choosing as the due date of the monthly payment. All dates between the 1st and the 28th are available to choose from.
The taxpayer should be made aware that the outstanding liability will continue to accrue interest and some penalties and should determine the monthly payment amount with this in mind.
The taxpayer can then choose to make their monthly payments via one of several payment options:
• Electronic funds withdrawal from their checking account
• Payroll deduction
• Check or money order mailed at least 7 to 10 days before the payment due date
Once Form 9465 has been submitted, the IRS usually will contact the taxpayer within 30 days to advise as to whether or not the request has been approved or denied. If the request has been approved, the IRS will then issue a notice detailing the terms of the agreement and requesting a fee of $105 ($52 if payments are to be made via electronic funds withdrawal). However, a taxpayer may qualify for a reduced fee of $43 if their income is below a certain level. The IRS will advise the taxpayer as to whether or not they qualify for the reduced fee.
Finally, the taxpayer should be made aware that if the agreed upon payments are not made on time, or if a later return is filed without the indicated tax balance being paid in full, the taxpayer will be in default on their agreement. Once the agreement has been defaulted upon, the IRS could, and may, take enforcement actions such as issuing a Notice of Levy to the taxpayer’s employer or bank.
