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Do you owe back taxes to the IRS? Are you having trouble coming up with the money to pay your Federal taxes? You are not alone.
If you cannot pay your tax debt within a reasonable timeframe, you can request to make monthly payments through an IRS tax payment plan known as an installment agreement.
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When it comes to setting up an IRS payment plan, there are a few options to choose from. In general, the type of arrangement you can obtain depends on the amount of taxes that you owe and how quickly you are able to pay. Let’s take a look at the different kinds of tax payment plans that are available through the IRS.
1. Individual Installment Agreement
This payment plan applies to individuals who owe $50,000 or less in income tax, interest, and penalties (combined). With an installment agreement, you can make regular monthly payments over time. Payments can be made through Direct Debit (from your bank account), check or money order, credit card (online or by phone), EFTPS (Electronic Federal Tax Payment System), payroll deduction (from your employer), or an Online Payment Agreement (OPA). When you set up an installment agreement, make sure you will be able to make the monthly payments without defaulting.
To apply for an installment agreement, fill-out and mail IRS Form 9465 (Installment Agreement Request). You can also apply through the IRS.gov website with the Online Payment Agreement Application. If you received an IRS notice or tax bill, you can call the phone number provided on the IRS letter to request a payment plan, or call the IRS Individual Assistance line at 1-800-829-1040.
READ: Dealing with Back Taxes
2. Installment Agreement for Individuals Who Owe Over $50,000
Individuals who fall into this category must submit Form 9465 as well as Form 433-F (Collection Information Statement). Form 433-F is used for obtaining your current financial information, in order to figure out how you can pay the overdue tax balance. On Form 433-F, you will be asked to list your accounts and lines of credit, plus real estate and any other assets you own. You’ll need to provide your employment information, including monthly income, as well as your monthly living expenses. Remember to attach your completed Form 433-F to Form 9465 and mail them together.
READ: IRS Tax Debt Relief
3. Small Business Installment Agreement
Businesses that owe $25,000 or less in back taxes may request an “In-Business Trust Fund Express” installment agreement (IBTF-Express IA). This type of payment plan usually doesn’t require a financial statement, although the business must currently have employees. An IBTF-Express IA provides a 24-month period to fully pay the outstanding tax debt. If the amount owed is greater than $10,000 (and below $25,000), the business must set up a Direct Debit installment agreement (DDIA). To apply for a small business payment plan, call the phone number on your IRS notice or tax bill, or call the IRS Business Assistance line at 1-800-829-4933. You can also apply through the IRS.gov website with the Online Payment Agreement Application.
Installment Agreement Fees
Note that it costs $120 to set up a standard agreement or payroll deduction agreement, and $52 to set up a Direct Debit agreement. If your income is below a certain level, the fee for setting up an installment agreement is $42. To request this reduced fee, submit Form 13844 (Application for Reduced User Fee for Installment Agreements). The charge for reinstating or restructuring an existing installment agreement is $50.
READ: How to Contact the IRS
How to Apply for an IRS Tax Payment Plan Online
Sources
"How to apply for a payment plan online with the IRS" - EA Tax Resolutions
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Frequently Asked Questions
What is the income tax debt limit to qualify for an Individual Installment Agreement?
To qualify for an Individual Installment Agreement, you must owe $50,000 or less in combined income tax, interest, and penalties. If you owe more than $50,000, you must submit both Form 9465 (Installment Agreement Request) and Form 433-F (Collection Information Statement), which requires detailed financial information including your assets, income, and monthly living expenses.
What payment methods are accepted under an IRS installment agreement?
The IRS accepts several payment methods for installment agreements, including Direct Debit from a bank account, check or money order, credit card (online or by phone), EFTPS (Electronic Federal Tax Payment System), payroll deduction through your employer, and the Online Payment Agreement (OPA). Choosing Direct Debit to set up your agreement can also save you money on setup fees compared to a standard agreement.
How much does it cost to set up an IRS tax payment plan?
Setting up a standard installment agreement or payroll deduction agreement costs $120, while a Direct Debit agreement costs $52. Taxpayers whose income falls below a certain level may qualify for a reduced setup fee of $42 by submitting Form 13844 (Application for Reduced User Fee for Installment Agreements). Reinstating or restructuring an existing installment agreement carries a separate fee of $50.
Can a small business request an IRS installment agreement, and what are the requirements?
Yes, businesses that owe $25,000 or less in back taxes may apply for an "In-Business Trust Fund Express" installment agreement (IBTF-Express IA), which typically does not require a financial statement but does require that the business currently have employees. This arrangement provides a 24-month repayment period, and businesses owing between $10,000 and $25,000 must set up a Direct Debit installment agreement (DDIA). To apply, businesses can call the IRS Business Assistance line at 1-800-829-4933 or apply through the Online Payment Agreement Application on IRS.gov.
How can a taxpayer apply for an IRS tax payment plan?
Taxpayers can apply for an installment agreement by completing and mailing IRS Form 9465 (Installment Agreement Request) or by using the Online Payment Agreement Application available on IRS.gov. Additionally, if you have received an IRS notice or tax bill, you can call the phone number listed on that notice, or contact the IRS Individual Assistance line directly at 1-800-829-1040. Those who owe more than $50,000 must also include a completed Form 433-F with their application.
About the Author
Tax Professional
Jessie Seaman is a tax professional at IRS.com with expertise in U.S. federal and state tax law. Their articles are written to help taxpayers understand complex tax topics in plain English.