Have you fallen behind on your taxes or found yourself unable to pay off your tax debt when it became due? If so, you might have already applied for an installment agreement payment plan and received an IRS Form 433-D in response.
This type of notice from the IRS requires action on your part, but it is a step forward to getting back in good standing with the tax agency. Learn everything you need to know about IRS Form 433-D, installment agreements, and your tax resolution options below.
What is IRS Form 433-D?
Form 433-D is an official form sent to taxpayers directly from the IRS. This form helps taxpayers set up an installment agreement arrangement and pay via direct debit.
This form should outline exactly how much you owe and how much you’re expected to pay each period. It should also contain your correct personal information and the terms and conditions of your IRS agreement. If you notice any errors, be sure to address them before filling out the form further.
Once you submit this form to the IRS, the tax agency will review the information you’ve provided and send you a notice regarding the approval or denial of your payment plan.
Why Did I Receive Form 433-D?
If you recently received Form 433-D from the IRS, then that means you are delinquent on your taxes and recently requested to set up an installment agreement or payment plan with the IRS. While asking for this arrangement, you also likely requested to make your payments by direct debit; however, it is not always required to be a direct debit agreement.
The IRS simply wants you to finalize the agreement by submitting your information for approval.
Who Needs to File IRS Form 433-D?
You need to file form 433-D if you want to agree to an installment plan. You shouldn’t file this form, however, if you believe that agreeing to the terms of the installment agreement might cause you significant financial hardship. You also shouldn’t fill out this form if you’re looking to pay your taxes with a payroll deduction.
Note that there is a high default rate on payment plans, and independent analysis of the taxpayers who set up payment plans indicates that about a quarter of them could have qualified for a tax settlement through a Partial Payment Installment Agreement or an Offer in Compromise.
Is Direct Debit Your Only Choice?
In some cases, the IRS will only approve a payment plan if you set up direct debits or payroll deductions. This rule applies if you owe over $25,000 or have previously defaulted on a payment plan. Even in these situations, the IRS won’t reject your payment plan request if you don’t set up direct debits. Instead, the agency will just request additional information.
If you don’t want to pay with direct debit, you could also opt to make payments by mail via a check or money order. You can also pay manually online through IRS Direct Pay, their online portal for making payments. You could also pay from a payroll deduction. If you’d prefer one of these options, then Form 433-D might not be the best option for you. Consult with a tax resolution attorney to learn more about the best payment option for your resolution.
How to Complete Form 433-D
While filling out Form 433-D, you must provide your bank account information, social security number, and other personal details. You’ll need to specify the terms of what you can pay and how long the payment plan is expected to last.
After you complete the forms, the IRS will review your information and consider it for approval. If approved, then you can start making payments on schedule when the IRS informs you to do so.
In general, the amount you’ll pay monthly will depend on both your income and how much you owe. If you’re not sure what level of payment you should suggest, then consider consulting with a tax resolution professional who can help you come up with an offer amount that best suits your situation.
More about IRS 433 Forms
IRS Form 433-D is just one type of official notice in a series of 433 notices. Here are some of the others:
- 433-A is a form that’s sent to collect information about wage earners and individuals.
- 433-B is a collection information form that’s sent to business owners.
- 433-F is a general collection information statement.
- 433-H is an installment agreement request and collection information statement.
All 433 forms are used by the IRS to gather more information about a taxpayer’s income, assets, expenses, and debts to determine what the taxpayer can afford to pay towards back taxes.
Where to Mail IRS Installment Agreement Form 433-D
When you receive your initial forms, you will get a letter outlining where to mail Form 433-D once you complete it. Figuring out how to submit IRS Form 433-D can be tricky if you accidentally lost your original letter. That’s because the IRS has several different addresses, and you don’t want your important financial information to get sent to the wrong place.
You also don’t want to have your tax situation delayed due to processing errors. That said, if you’re not sure where to mail the form, then it might make the most sense to consult with a tax resolution attorney who can help ensure it gets to the right place and is processed in a timely manner.
IRS 433-D Installment Agreement Plans
IRS installment agreements are negotiated payment plans you create with the IRS when you owe them a balance. You’ll need to qualify for this type of agreement by contacting the IRS directly or having a tax attorney consult with an IRS agent on your behalf.
Terms and Conditions of a Payment Plan
When you sign up for your payment arrangement with the IRS, you’re explicitly stating that you agree to pay the allotted amount at the scheduled time. That said, you’re also agreeing to a number of other terms and conditions, including:
- Agreeing to file and pay your federal taxes on time in the future.
- Allowing all future federal tax refunds to get applied directly to your tax debt until you’ve paid it off in full.
- Giving the IRS the full authority to rescind the agreement.
- Understanding that a failure to keep up with these terms could result in a termination of the agreement.
How to Qualify for an Installment Agreement
If you want to qualify for an installment agreement, then you’ll first have to resolve any unfiled taxes you have on your account and take steps to ensure you have proper withholding from your pay or are making timely estimated tax payments to prevent you from owing future taxes. Once you’ve filed all your past-due tax returns and made steps to ensure you are paying current-year taxes timely, you’ll be able to learn more about your options.
You could qualify for a short-term plan if you owe less than $100,000, and you can finish paying off the tax debt within 180 days or less. You could qualify for a long-term payment plan if you owe $50,000 or less, and you will need more than 180 days to pay off your debt in full. You can get long-term payment plans, but you typically need to provide additional financial information.
What Happens if You Miss a Payment on Your IRS Agreement?
When you’re on an installment agreement, your payments are subject to very specific terms and conditions. If a taxpayer misses a payment, falls behind on filing their taxes, or doesn’t follow up with the IRS when they’re asked to, the agency could terminate the installment agreement. Even worse, they could initiate different collection efforts such as levies, garnishments, Federal tax liens, and other asset seizures.
If the IRS is lenient and allows you to resume payments, then you’ll still have to pay a reinstatement fee of $89 to get your installment agreement back on track.
Consequences of Not Paying Your Tax Debt
If you don’t submit to an installment agreement or make arrangements to settle your tax situation, your tax debt will continue to grow as you incur penalties and interest over time. You could also get hit with collection actions. This could include federal tax liens, levies, or even a wage garnishment order.
What Will Happen With Future Tax Returns if I’m on an Installment Plan?
If you agree to an installment plan, then you must stay in good standing with the IRS in order to continue on with the payment plan. That means you need to stay current with future tax returns and file on time. You’ll also need to pay all your tax debts when they become due. You won’t be able to add on future tax debt to your current payment plan.
If you’re owed a refund, then the full refund amount will go towards your tax debt until you’ve paid it off in full.
Alternatives to Installment Agreement Plans
An installment plan might not be your only option when it comes to resolving your tax debt. You should also consider alternatives like an offer in compromise agreement, which allows you to negotiate your overall tax burden down to a lower amount.
If you truly do not have the finances to make monthly payments, then you might be eligible to get currently-not-collectible status with the IRS. This status will help you avoid collection efforts from the agency as long as you can prove that you can’t realistically pay off your tax debt without suffering financial hardship. You may also qualify for bankruptcy.
Know Your Options: Penalty Relief or Debt Forgiveness
You might have additional options when negotiating with the IRS, such as penalty relief or debt forgiveness. Penalty abatement can help you resolve certain fees you’ve incurred from failing to file or failing to pay on time. If you’ve never encountered tax problems before, then you might be eligible for first-time abatement.
To learn more about what you could potentially qualify for in tax debt relief, consult one-on-one with a tax resolution professional who will be able to determine all the options available to you.
Ready to Talk to a Tax Resolution Attorney About Your Options?
Are you wondering whether you need tax representation? If your tax debt is causing you to face potential legal consequences or collection efforts, then it might be time to consult with a tax resolution attorney who can help you navigate your situation. The right lawyer can make sure your rights are upheld as you negotiate with the IRS to come to an agreement.
Our experienced tax attorneys at Wiggam Law can help you determine the best way to handle your situation. Don’t wait to get help. Schedule a consultation with our firm today to get started on your tax resolution journey.