If you can't pay the total amount of income tax you owe, you can file Form 9465 to break the unpaid amount into monthly installments.
Like Form 4868, Form 9465 is not very complicated. The information you need to provide consists of:
- your contact information, including Social Security numbers for you and your spouse (if applicable)
- contact information for your bank
- contact information for your employer
- the amount you owe
- the amount you can pay now
- a suggested amount for your monthly payment
- a suggested monthly due date for your payment
- bank account information (if you want your installments to be debited directly from your bank account)
The IRS is obligated to accept your installment agreement if:
- you owe less than $10,000
- you have filed on time every year for the past five years
- you are not currently engaged in an installment agreement
- you can prove that you are unable to pay the full tax immediately (record of credit card debt, living expenses, et cetera)
- you consent to a three-year (or shorter) term
If you don't meet these qualifications, the IRS may adjust the terms of your installment agreement.
The fee for setting up an installment agreement is:
- $52 if you set up an automatic debit agreement
- $105 if you will be paying manually (sending in payments by mail or online)
- $43 for eligible low-income individuals (your income is 250 percent or lower than the poverty level set by the Department of Health and Human Services)
If you are supposed to get an income tax refund in any tax year while you are making payments on an installment plan, your refund will be applied toward what you still owe the IRS. Yes, the IRS will get its money.
As with any other debt, missing a payment or multiple payments can make for a bad day. Not paying could put you in danger of defaulting on the installment agreement. And when the IRS does not get its money, it goes after its money.
The IRS will send you a Notice of Federal Tax Lien when it has acquired the right to seize your personal property (your house, your furniture, your antique galleon). When the IRS sends you a Notice of Federal Tax Levy, it will grab your property and auction or sell it to satisfy your tax debt.
The two things to remember in your dealings with the IRS are deadlines and payment. Pay what you owe on time, whether on an installment agreement or not, and you'll be fine.
If you'd like to know more about filing extensions and related topics, follow the links on the next page.