If you’ve ever opened up a letter from the IRS and felt your stomach drop, you’re not alone. Owing taxes can be stressful, especially if you don’t have the cash to pay them off in one shot.
The good news? The IRS knows that not everyone can pay their tax bill immediately.
That’s where IRS Form 9465, Installment Agreement Request, comes in. This form allows you to request a payment plan with the IRS, enabling you to spread your debt over time rather than depleting your bank account or incurring additional debt.
Filling out a form is pretty straightforward, but navigating the IRS system and choosing the right tax debt solution isn’t always simple. That’s where working with experienced tax attorneys, like the team at Wiggam Law, can make all the difference.
We’ll explain everything you need to know about Form 9465 and your alternatives, and show you why getting expert guidance is often the smartest financial move.
Key Takeaways
- You can apply to pay your tax debt over time online or using Form 9465.
- Both taxpayers and businesses can apply.
- There are different payment agreements depending on how much you owe.
- Setting up an Installment agreement can stop IRS collection activities.
- There are some alternatives to setting up a payment plan.
What Is IRS Form 9465?
IRS Form 9465, officially called the Installment Agreement Request, lets taxpayers set up a monthly payment plan with the IRS. Instead of paying your balance owed to the IRS at once, you spread your payments out over time. Whether it is an unexpected bill for self-employment taxes, a small business with payroll taxes, a sudden change in withholdings, or penalties piled on from past returns, the reality is the same. You owe more than you can comfortably write a check for today.
The group of people who mostly use Form 9465 are individual taxpayers with balances under $50,000 (including tax, penalties, and interest). You can apply for the following using this form:
- Guaranteed installment agreement – those owing less than $10,000, who can pay off the balance within three years.
- Simple payment plan – those owing up to $50,000, who can pay off the balance within 10 years or by the Collection Statute Expiration Date (CSED) if sooner.
- Non-streamlined installment agreement – if you owe over $50,000 and can pay it off by the CSED.
For those taxpayers who owe over $50,000, the process may get a little trickier. You can still apply for an installment agreement, but the IRS may require additional information about your financial situation. They will want to know how much you can pay each month before letting you spread payments out. They also want to ensure that you don’t have the means to pay in full, because, if possible, they would rather receive payment now than later.
Who Is Eligible to File Form 9465?
The IRS does have some clear criteria for starting up a payment plan. They include:
- Owe $10,000 or less? You may qualify for a guaranteed agreement. Also, you’ll need to pay off the amount in three years or less.
- Owe $50,000 or less? You may qualify for a simple payment plan. These are the easiest to enter into and don’t usually require an in-depth financial disclosure.
- Owe more than $50,000? You can still apply, but you may need to provide detailed financials.
- Businesses? Only if you’re a sole prop that’s no longer operating,
You can use this form to apply for payments on individual income tax, Trust Fund Recovery Penalty (TFRP) personal assessments, and unpaid payroll taxes from an out-of-business sole proprietorship.
Step-by-Step: How to File Form 9465
Here are the steps you can follow to complete this form. To get help, contact a tax attorney today.
- Check if the online option applies. If your debt is under $50,000, the IRS often approves applications instantly online.
- Complete the form. You’ll list your tax years owed, balance, and proposed monthly payment.
- Choose a realistic monthly payment. Too much or too little as a proposed payment can cause the IRS to push back.
- Submit the form to the IRS. The mailing address depends on your state. Or you can attach this form to your return when you file if you’re requesting payments related to tax due on your return. You can also e-file this form with your return using most online software or by working with your tax preparer.
- Receive approval and set up payments. Direct debit agreements are often the best. They’re cheaper in setup fees and reduce the risk of default.
Sounds straightforward, right? But please note: IRS rules are nuanced. The IRS has its own rules and algorithms for what they’ll accept. If your finances are complicated, you may want to call in the professionals to help. Wiggam Law can negotiate directly with the IRS and ensure that you get the most manageable agreement possible.
Fees, Interest, and Penalties
An installment agreement gives you a bit of breathing room, but it won’t erase your debt. Here are some of the things that you can expect from setting up an Installment Agreement:
- Interest: Not only does it continue to accrue, but it will compound daily until paid in full.
- Penalties: 0.25% per month when you’re on a payment plan.
- Setup fees: Ranges depend on the type of agreement. The cheapest option is to apply online and set up direct debit payments. If you mail in the application, the IRS charges a higher set-up fee. Low-income waivers and reductions are possible.
Even if you set up an Installment Agreement with the IRS, future tax refunds will be applied to the balance due on your installment agreement. You’ll also want to calculate the long-term cost of setting up a payment plan. Having an experienced team of tax professionals on your side means that you can review all of your options and make sure you avoid costly mistakes.
The Pros and Cons of Using IRS Form 9465
The pros of setting up an IRS installment agreement:
- Stopping collection actions
When you owe the IRS, the fear of enforcement actions like liens and levies is always in the background. When you file Form 9465 and get on a formal payment plan, the IRS typically halts those harsh collection measures.
- Financial breathing room
Instead of scraping together thousands of dollars all at once, you can break your balance down into smaller monthly installments. This structure makes repayment manageable for many taxpayers and prevents a single tax bill from wrecking their monthly budget.
- Built-in penalty relief
While interest never stops, certain failure-to-pay penalties are reduced once you have an installment agreement locked in. That translates to fewer extra costs over time compared to if you just ignored the debt.
- Streamlined process if you owe less than $50,000
No lengthy forms, no intrusive financial disclosures, just a straightforward path to approval – as long as you meet the qualification criteria. For many, this simplicity means less stress and fewer bureaucratic hurdles.
The cons of setting up an IRS payment plan.
- Higher total amount paid
While an installment agreement gives you time, you’ll often end up paying more overall because of interest and fees. Imagine owing $20,000 and agreeing to pay it down over several years. By the time you’re finished, the total outlay could be thousands higher. In essence, you’re “renting time” from the IRS, and they charge you interest and penalties for that privilege.
- Set-up costs
Depending on whether you choose direct deposit payments or plan to mail in checks, you’ll face fees ranging from $22 to $225. These aren’t deal breakers for most, but they add to the total bill you’ll pay.
- Risk of default
Life happens. You may lose your job, face medical expenses, or just forget to make a payment one month. If you default, the IRS has the power to terminate your agreement, reinstate harsher collection activities, and even demand the full balance immediately.
For many, setting up a payment plan offers peace of mind and can be a lifeline that stops the worst IRS actions. But there is a tradeoff. Your debt lingers. Your interest grows. A tax attorney at Wiggam Law can review your specific circumstances and see if a basic payment plan is the right strategy. They will look beyond the surface and find the solution that is right for you.
Alternatives to Form 9465
Form 9465 isn’t the only way to set up a payment agreement with the IRS. Alternatively, you may do the following:
- Online agreement – set up payments online if you owe less than $50,000.
- Phone call – you can call the IRS with the info from Form 9465 and ask them to set up payments.
- Professional help – A tax relief professional or even your tax preparer, in some cases, can set up an installment agreement for you.
Other IRS Payment and Relief Options
Sometimes an Installment Agreement isn’t the right move. Other options include:
- Full Payment – If possible, this is the cheapest option as you don’t pay interest or penalties
- Short-Term Payment Plan – Pay in under 180 days (and no application is required, though interest and penalties are present)
- Offer in Compromise (OIC) – There is a potential to settle for less, though qualifying may be difficult.
- Currently Not Collectible (CNC) – Collection is paused for certain financial hardships
- Bankruptcy – Sometimes discharges tax debt, though rules are strict, and not all tax debt qualifies to be discharged.
Wiggam Law specializes in evaluating all possible options. Our tax professionals will analyze your financials, negotiate with the IRS on your behalf, and determine if you qualify for an OIC or CNC.
Tips for Choosing the Best Option
Keep these tips in mind as you look for a payment plan:
- If you owe less than $50,000 and can handle monthly payments, a simple payment plan can work.
- If you can pay within six months, a short-term plan is cheaper than extending payments.
- If you can’t pay at all, you may qualify for an Offer in Compromise or qualify as Currently not Collectible.
- If you owe a large balance or own a business, you may want professional legal support.
Common Mistakes to Avoid
To improve your chances of success and to avoid default once you’re on a payment plan, avoid these common mistakes:
- Lowballing payment offers
- Not including all owed balances
- Defaulting by missing payments
- Failing to file future returns
- Ignoring IRS communications
Most taxpayers don’t realize what can happen if even one misstep happens. Failing to adhere to a payment plan schedule or neglecting to respond to correspondence from the IRS can lead to problems arising. You may have your Installment Agreement terminated and owe the balance right away. Wiggam Law will monitor your plan and make sure that problems don’t arise.
Final Thoughts: Facing Tax Debt with a Clear Plan
Discovering you owe the IRS isn’t fun, but it can be manageable if you take the right steps. You don’t have to go through this alone. The professionals at Wiggam Law are experts in IRS tax matters. The right tax professional will navigate installment agreements, negotiate settlements, and stop collections from happening.
If IRS debt is weighing on you, don’t wait for penalties and interest to pile up higher. Contact Wiggam Law today or give us a call at (404) 233-9800 to get help from experienced tax attorneys and take your IRS pressures away.
IRS Form 9465 FAQs
Does Form 9465 stop interest and penalties?
Not entirely. Interest continues to accrue until your tax debt is paid off. However, some penalties may be reduced when an agreement is approved.
How long does IRS approval take?
For debt under $50,000, online approval may happen immediately. If you mail in an application, processing can take weeks. Make payments while you wait to hear back from the IRS.
What happens if I miss a payment?
The IRS can terminate your plan, assess penalties, or take enforcement action against you.
Can I change or modify my agreement?
Yes. You will need to file new paperwork and wait for the IRS to review what you submit.
Is an installment agreement always best?
It might be, particularly for smaller debts. However, there may be other options available to you.
Sources:
https://www.irs.gov/forms-pubs/about-form-9465
https://www.irs.gov/payments/online-payment-agreement-application
https://www.irs.gov/pub/irs-pdf/i9465.pdf
https://www.irs.gov/newsroom/what-if-i-have-requested-an-installment-agreement
https://www.taxpayeradvocate.irs.gov/notices/installment-agreements/
