Category: Installment Agreement

If you can’t apply using the IRS’s online payment agreement, or you don’t want to speak with an IRS agent, you may use Form 9465 (Installment Agreement Form) to set up a payment plan. This form is used for individuals, not for businesses. Businesses can only use this form if they are no longer in the business.

Who Should File Form 9465?

If you owe more than $50,000, you should use Form 9465, since you can’t apply for an online payment plan with that amount of tax debt.

However, you don’t need this form if you can pay your overall debt regardless of the amount within the next 120 day.

If you are paying for an existing installment plan, you can use this form to roll your new tax liability into your existing payment plan.

 

Part One of Form 9465

The very top of the form should have details on the tax return you filed and the year in questions. This should also include other information such as our social security number, business name (if you have), address, employer’s name, and the name of financial institution.

You need to add details about the amount you owe, the amount you are paying now, and the monthly amount you can pay. To compute the amount you can afford, divide the total due by 72 and that will give you the monthly payment for 6 years. The form will also ask you to select your preferred payment date on either the 1st and 28th of every month.

If you think you can’t pay off your tax debts within 6 years, you will have to complete Form 433-F (Collection Information Statement). This form will ask you to provide information about your personal finances, so the IRS can assess if you qualify for another type of arrangement.

The bottom of part one of Form 9465 is where you can set up automatic payments using the details of your bank routing and account numbers. You may allow the IRS to accept payments directly from your paycheck by completing Form 2159 or Payroll Deduction Agreement.

File form 433-F if your tax debts to the IRS are above $25,000 and you don’t want to make automatic payments. But the information on this form must assure the IRS that you can make repayments. If your debts are over $50,000, you need to include Form 433-F whether you set up automatic payments or not.

Part Two of Form 9465

Complete Section 2 of Form 9465 if your debts are between $25,000 and $50,000 and you have defaulted on a previous payment plan.

The IRS removed this requirement for anyone with tax debts below $50,000 somewhere in 2016-2017. The section of this form asks details about your country of residence, number of dependents, number of people living in your house over the age of 65, marital status, take-home pay, and how often you get paid.

For married people, the information should state if you share expenses with your spouse or not.

You also need to include the number of vehicles you have and the monthly vehicle loans. The premium amount of your health insurance should also be included. Furthermore, court-ordered payments and monthly child care expenses should be taken into account.

 

Form 9465 Fees

The setup fee for an Installment Agreement for this Form is $225 (as of 2017) and $107 for direct debit. You can pay the minimum fee of $43 if your income is below a certain threshold. The IRS will let you know if you should pay the minimum fee, but if you don’t receive any instructions, then you may request for the reduced fee through Form 13844 (Application For Reduced User Fee For Installment Agreements).

You will pay less at a fee of $31 when you apply online and set up a direct debit. That’s more affordable than using this form. You will pay $89 to make adjustments to your existing payment arrangement.

 

Response Time for Form 9465

The IRS claims that the response time varies, but it usually takes at least 30 days to get a response. However, you should expect a delayed response time when you request an installment agreement in April for a tax return filed after March 31.

You should make your payments when the date of the first payment comes in but you still haven’t gotten a response from the IRS.

 

 

Taxpayers have their right to appeal an IRS Installment Agreement if the request for the installment agreement is rejected.

To be considered, you should appeal an IRS installment agreement within 30 days. And this means the IRS cannot levy your property, garnish your wages, or do any serious action until the appeal ended and the IRS come up with a decision.

How to Appeal to the IRS for a Rejected IRS Installment Agreement

A Revenue Officer may contact you directly through mail or phone call once the IRS rejects your Installment Agreement.

Here are the steps you need to do if the IRS notified you but a Revenue Officer is not involved:

1. Contact the IRS using the phone number found on your letter
2. Explain why the IRS should accept your Installment Agreement
3. If the agent refuses your request, you need to speak with a Revenue Officer or IRS manager
4. Tell them you would appeal if they are not willing to work with you
5. Do step 3 below

 

If an IRS Revenue Officer notified you of your rejection, here’s how to appeal an IRS installment agreement:

 

1. Contact the IRS using the phone number on the notice and explain why you disagree with the decision and you’d like to appeal
2. If the Revenue Officer didn’t accept your Installment Agreement, you should ask him or her to direct you to the manager
3. If there’s still no success in speaking with the Revenue Officer’s manager, you may ask to speak to a Collections Manager
4. Explain your side to the Collections Manager
5. Accomplish Form 9423 (Collection Appeal Request)
6. Have a written explanation of your appeal and send this along with Form 9423
7. Postmark Form 9423 at least 30 days from the date in rejection letter
8. Wait for the decision

 

Keep in mind that the decision of the Office of Appeals is final. You cannot appeal again once the Office of Appeals rejects your appeal. You should consider hiring a tax professional to increase your chances to appeal an IRS Installment Agreement

 

Why an Installment Agreement Gets Rejected?

There are common reasons for the rejection of an Installment Agreement:

1. There were inaccuracies on Form 433 (Collection Information Statement)
2. The IRS believes you are living beyond any normal or deprived person can. For instance, you send your kids to private schools or own expensive cars and luxury items.
3. Form 433 was incomplete
4. You neglected your responsibilities with Installment Agreement in the past
5. You have outstanding past tax returns

 

How to Appeal the Termination of an Installment Agreement or Reinstate It

 

You will receive a mail, or a CP 523 notice, from the IRS once the latter plans to cancel your Installment Agreement.

 

The CP 523 notice tells you the reasons for the termination of an Installment Agreement and it’s also warning that the IRS is going to levy your assets.

 

You have up to 76 days to request an appeal for the termination of an Installment Agreement. But you must appeal within 30 days after the notice was issued or else the agreement will be terminated on the 46th day. If you appeal within the timeframe, then the agreement will be reinstated once your appeal gets accepted.

 

Take note that you can only appeal a termination of Installment Agreement notice within the 76-day period. So you should not let your agreement lapse twice in such a short time period.

Here are the things you should do once an IRS Revenue Officer notifies you of the termination of Installment Agreement:

1. Contact the IRS and explain to them why you’d like to appeal the termination. Remember that you only have 30 days to appeal or maximum of 76 days.
2. If the IRS Revenue Officer rejects your request to reinstate your Installment Agreement, you’d better speak to their manager
3. Better yet speak to the Collections Manager if there’s still no success with the Revenue Officer’s manager
4. Explain your case to the Collections Manager

 

The rejection letter may also come into writing. Here are the things you should do to appeal:

 

1. Fill out Form 9423 or the Collection Appeal Request
2. Include a written letter of your request for appeal with Form 9423
3. Mail Form 9423 and have this postmarked at least 30 days from the date on your CP523 notice

What Triggers the Termination of an IRS Installment Agreement?

Below are some of the reasons why an IRS Installment Agreement termination happens:

1. You have missed payments. The IRS will give you 30 days before terminating your agreement if it is just your first or second missed payment
2. The information you put on Form 433 was incorrect or untruthful
3. You did not file a current return
4. You did not make payments on the current tax bill

Appealing for the denial or termination of an Installment Agreement will never be easy. This is why hiring a tax professional is the best option to get you through the right process.

Forms 433 (Collection Information Statement) and 9423 (Collection Appeal Request) can be really difficult to understand for an ordinary person, so it’s better to have a tax professional helping you get through this and have your appeal for an IRS Installment Agreement accepted.

 

 

 

The Partial Payment Installment Agreement (PPIA) is just the same with a regular installment agreement where you pay for your tax debts to the IRS on a monthly basis.

You should disclose your financial information to the IRS to apply for PPIA. Those information should include your income, debts, assets, and expenses.

Partial Payment Installment Agreements are more difficult to apply and get accepted than other types of Installment Agreements, but they are easier to get compared to an Offer in Compromise.

The IRS only accepts these agreements if you are running out of assets to liquidate and monthly disposable income for you to get into an installment agreement. The IRS is also certain that you lack the capability and resources to earn enough money to pay off your debts over the years.

The Collection Information Statement will assess your monthly payment. Individuals will have to accomplish 433-A while businesses will fill out 433-B form. These forms will give IRS the judgment on how much you are capable of paying.

The Partial Payment Installment Agreement  allows you to pay less than your original tax debt because when the collection statute expiration date (CSED) expires for each year you were assessed then the debt turns out to be “uncollectible.” The CSED’s time frame is usually 10 years from the date the taxes were assessed.

 

What are the Requirements for a Partial Payment Installment Agreement?

• You have some ability to settle your debts to the IRS, but you cannot pay in full
• You tax debt is more than $10,000 which includes penalties and interests
• Filled out Form 433 (Collection Information Statement)
• Filled out Form 9465 (Installment Agreement Request) or applied for Installment Agreement online
• Filed all past tax returns
• Have not filed bankruptcy or in the state of bankruptcy
• No Offer in Compromise accepted
• No assets or cannot obtain equity in assets for the following reasons:

• • Assets are not marketable
  • The value of assets would not suffice the amount of tax debt
  • Assets won’t be enough to be considered as a collateral to get a loan
  • Your non-liable spouse did not agree to have the assets sold
  • Selling the assets would make you struggle financially

How to Request a Partial Payment Installment Agreement

• An individual should accomplish and print Form 433-A, while a business should use Form 433-B. You must prepare documentation for expenses and income you detailed on Form 433
• Fill out and print Form 9465 (Installment Agreement Request) or apply for an Installment Agreement online
• Give an estimated amount of what you think you could pay each month. The IRS assesses the maximum monthly payment based on Form 433. Your monthly payment must cover your tax debt, but you should consider what you are capable of paying. If you have missed payments, you will have to pay $89 for the reinstatement fee or you may lose the agreement.
• Send forms 9465 and 433 along with the copy of tax return to the IRS. But when you e-file, you won’t need a copy of your return. To be safe, send your first payment plus the installment fee with your application. The fee is usually $225, but a direct debit is lower at $107
• Wait until the IRS responds to your request. It would take 30 days for the IRS to respond
• If there’s no response within a month, make sure to continue your monthly payments but contact the IRS directly

 

A Partial Payment Installment can be your option if you are uncertain with making monthly payments on a regular installment agreement. If your collection information statement or Form 433 clearly shows that you aren’t capable of paying the IRS at least $25 per month then you may have a non-collectible status.

 

 

 

A Verified Financial Installment Agreement is also a type of an installment agreement that requires you to divulge your financial information to be considered.

If you as individual owe more than $100,000, or if your business owes more than $25,000, you will have to disclose your financial information to qualify for an installment agreement. You should accomplish a Collection Information Statement that reveals information about your income, debts, expenses, and assets.

Even if you owe somewhere from $50,000 to $100,000 and you refused to use a payment method of direct debit or payroll deduction with your Installment Agreement

Even if you owe between $50,000 to $100,000, and you do not use a payment method of direct debit or payroll deduction with your installment agreement, you will be required to divulge your important financial information.

With the complexities of this Installment Agreement, it is highly advisable to get a licensed tax professional to improve the success of your application.

It is highly recommended that you use a licensed tax professional if you want to improve your chances of success with your application. The IRS prefers you pay down balances to the former respective thresholds in order to obtain an installment agreement.

Below are the general requirements for an Installment Agreement that require financial disclosure:

• Business with tax debts of more than $25,000 and individuals with debts over $50,000 and do not want to consider a direct debit or payroll deduction
• Completion of Form 9465 (Installment Agreement Request)
• Completion of Form 433 (Collection Information Statement). As of 2017, the Form 433-F must be completed by individual taxpayers
• Must not have filed bankruptcy
• Must not have any Offer in Compromise application
• Completed all tax returns from the earlier years
• Successfully fulfilled tax obligations in the past
• Did not enter into an IRS Installment Agreement in the last five years. There are rare exceptions where new tax liabilities can be included in an existing Installment Agreements

 

How To File A Verified Financial Installment Agreement

• Print and fill out Form 9465 (Installment Agreement Request) or contact the IRS at this number 1-800-829-1040
• Print and accomplish IRS Form 433 or Collection Information Statement. Businesses should use 433-B while individuals should use 433-F
• Send the required forms and a copy of your tax return to the IRS. If you efile your return, just send Forms 9465 and 433 to the IRS. The address depends on your residence, so you must use the correct IRS address.

Form 433-F Special Instructions and Reminders

There are changes in 2017 that require individual taxpayers to complete Form 433-F. Below are some of the things you could expect from Form 433-F:

• Part A: Accounts and Lines of Credit. List all of your financial accounts, including your checking accounts, IRAs, 401ks, brokerage accounts, etc. You must include a minimum of 90 days statements on the worth of all of these accounts.
• Part B: Real Estate. Include all the real estate properties you have such as your primary residence, vacation homes, and timeshares. You have to list your monthly payments and the respective equity of each property. Equity is the value of the property less the amount owed on the property.
• Part C: Other Assets. This may refer to automobiles, boats, and life insurance policies. You have to include the monthly payments and equity for each.
• Part D: Credit Cards. Include all credit cards and detail their balances plus  minimum monthly payments. This also includes store card
• Section E: Business Information. Note any accounts receivables owed to your business. You should also include details if your business accepts credit cards or not.
• Part F: Employment Information. Detail yours and your spouse’s income. You will need photocopies of your pay stubs and contact details for your employers. You will need to detail how many times you get paid.
• Part G: Non-Wage Household Income. Include other sources of income such as alimony, pension, child support, self-employment income, and rental income. Other things that apply under this category are unemployment income, social security payments, and interest and dividends.
• Part H: Living Expenses. Detail the things you need to provide for you and your dependents. These are the things needed to live on, including the food, transportation, medical bills, rent, student loan payments, and mortgages. You need to hand over copies of bills for the last three months.

 

A Streamlined Installment Agreement (SIA) is appropriate for individuals with tax liability of $100,000 or less, or businesses with $25,000 or less.

This installment agreement is called “streamlined” because no Collection Information Statement is required. Those information include assets, debts, income, and expenses.

The duration of the  Streamlined Installment Agreement is 60 months up to 84 months under the new IRS policies. But the SIA does not extend to Collection Statute Expiration Date (CSED) or the date the tax debt expires and the IRS cannot collect any more payments from you.

If you cannot afford the minimum monthly amount on a Streamlined Agreement, you may consider Partial Payment Installment Agreement. But to qualify for an Offer in Compromise is to prove your financial hardship to the IRS.

 

What is the Streamlined Installment Agreements and the Fresh Start Initiative?

In 2011, the IRS Fresh Start Initiative changed the eligibility requirements for the Streamlined Installment Agreements.

Before the amendments, businesses should have less than $10,000 in tax debt, and individuals should have less than $25,000. Now, individuals with tax debts up to $100,000  and businesses with an income tax balance up to $25,000 can qualify for Streamlined Installment Agreements.

SIAs and Tax Liens

Individuals with tax debt of $25,000 or less and use direct debit SIA or payroll deduction SIA can have their tax liens withdrawn from their credit report.

The taxpayer must pay debts for at least three consecutive months before the IRS can withdraw the tax lien. But with recent IRS expanded criteria, a tax lien will be placed on individuals with debt balance of $50,000 or more, or if the balance is  between $25,000 and $50,000 and the individual taxpayer avoids using direct debit or payroll deduction as a payment option.

Recent IRS Changes

Normally, individuals with balances below $50k can obtain up to 72-month terms. But in last quarter of 2016, the IRS began testing some new criteria for those people with more than $50k in tax liability. The test will be until the end of September 2018.

Individuals with tax debts between $50,000 to $100,000 can have up to 84 months of Streamlined Installment Agreement (SIA) given that the debts are settled before the Collection Statute Expiration Date (CSED) and the payment method is direct debit or payroll deduction.

Sole proprietors with debts between $50,000 to $100,000 can use the new 84-month plan.But active businesses with debts of $25,000 or less can have a 36-month SIAs and they should settle the balance within 24 months or by the CSED.

Streamlined Installment Agreement Requirements

• An individual taxpayer owes $100,000 or less. This amount also includes all the interest and penalties over the period or length of the agreement, not just what has been currently accumulated. Note that the amount of the penalties and interests will be assessed.
• An individual taxpayer owes $50,000 or less and he or she is willing to pay off debt over the next seven years or before the CSED expire. If one owes between $50,000 to $100,000, he or she is willing to settle the balance over the next 84 months. If the CSED terminates the repayment period, the individual must sign a waiver to extend the repayment duration.
• The individual must filed all past tax returns. Any unfiled or delinquent returns must be unfiled before qualifying for an installment agreement.
• When filing jointly, married couples should have not enrolled in any installment agreements over the last 5 years.
• Have not filed for bankruptcy
• Must be willing to pay for a set up fee to start the Streamlined Installment Agreement. A $31 set up fee will be paid for the direct debit using the OPA. The set up fees for other methods are higher compared to using OPA. Otherwise, a fee of $89 will be charges to restructure an installment agreement.

How to File or Request a Streamlined IRS Installment Agreement

1. Make sure that you don’t have any missing tax returns by contacting the IRS. File those returns and comply because you won’t get accepted if you have missing returns.  
2. Use the IRS  Online Payment Agreement (OPA) to apply if you are a business with tax debt of $25k or less or an individual with $50k or less. But you may also call the IRS or mail form 9465 especially if your balance is higher than those mentioned. You may also consider hiring a licensed tax professional.
3. You have to ensure that your monthly payment is able to pay off debt within the CSED. You’ll save yourself from interest and penalties if you settle your debts fast.
4. You can have the estimated amount you need to consider on your monthly payments by dividing the total amount you owe by 72 or by the number of months left on CSED if you have balance of $50,000 or less. Otherwise, you will divide by 84 or the number of months left before the CSED expires.
5. Select a payment date, which must be between the 1st and 28th, but works well with your budget. Late payments will terminate the agreement
6. Choose a payment method. Under the new IRS criteria, the debts between $50,000 to $100,000 require direct debit or a payroll deduction and carry a tax lien. Debts amounting to $25,000 and $50,000 do not require direct debit or payroll deduction and the IRS may place a tax lien. Debts below $25k will not have a tax lien regardless of the payment method.
7. Use Form 2159 or Payroll Deduction Agreement if you want the IRS to take out your payments from your paycheck. A set up fee will be included on your first payment.
8. Hire a licensed professional to help you deal with the forms and process.
9. The IRS gives a decision within 30 days. Just to be safe, you will have to secure your payments until you get a response from the IRS. You may call the IRS to speed up the setup process.

 

Other Important Reminders

Make sure to call the IRS if you cannot make monthly payments, because missed payments could terminate your agreement. Once your agreement is terminated, the IRS can start the seizure of your assets.

If you are not qualified or a good candidate for the Streamlined Installment Agreement, you may qualify for a verified financial installment agreement or an installment agreement that requires you reveal your financial information to the IRS.

 

The IRS Direct Debit Installment Agreement (DDIA) allows you to pay off your tax debts using your bank account. The direct debit can be set up with multiple Installment Agreements such as Guaranteed, Streamlined, and Verified Financial Installment Agreements.

You can use the IRS Online Payment Agreement Application when setting up a direct debit installment agreement. All you need to do is include a routing and account number in Section 13 of that form. Direct Debit Installment Agreements provides more advantages than disadvantages.

IRS Direct Debit Installment Agreement Benefits

Using the Direct Debit option will help you avoid penalties along with other benefits:

• The set up fee for the Direct Debit Installment Agreement through IRS Online Payment Agreement (OPA) is a lot cheaper. It costs $31 for OPA while $107 for other set up methods.
• You will avoid any delays in payments since the payment will be taken out directly from your bank account
• This is stress-free method because you don’t have to mail this and pay for postage every month. This also means not having to worry about lost mail and misplaced payments
• You don’t have to pay for credit card charges
• When you owe less than $25,000, you can have your IRS liens withdrawn from your credit after the third month
• If a business has a tax debt of $25,000 then you can qualify for the Streamlined Installment Agreement
• If you owe between $50,000 to $100,000, you may obtain up to an 84-month streamlined installment agreement
• If you owe between $25,000 and $50,000, an IRS lien will not be placed on your credit

 

IRS Direct Debit Installment Agreement Disadvantages

Just like any other payment methods, the IRS Direct Debit Installment Agreement also has a drawback, too. If you have insufficient funds in your account, you will have incurring overdraft or insufficient fund fees

In general, the Direct Debit Installment has plenty of benefits compared to other installment payment types.

 

 

An Installment Agreement with the IRS may be a viable option when:

1. It won’t be possible to pay your tax debt in full immediately, but you can manage a monthly payment plan.
2. You are not qualified for an Offer in Compromise
3. A loan with lower interest rates cannot be acquired and it makes you unable to pay your tax debt.

When proposing for an Installment Agreement, you should be ready to present your monthly payment plan. The principal balance must be addressed, but don’t forget to include interest accrued and other penalties. You might end up owing them more if your monthly payment doesn’t factor in these additional costs.

Another bonus of this arrangement is that the IRS will not be able to seize your assets as long as the Installment Agreement is in place. Some examples may be an exception but these are rare cases. For instance, if you are able to sell your home, the capital gained might be required by the IRS to settle outstanding tax liabilities first.

What is the process in requesting for an Installment Agreement?

Depending on your financial capability and balance of total debt, the IRS looks for ways to enter into an Installment Agreement.

1. Check online to apply for the IRS payment agreement but make sure that your tax liability is $50,000 or less. Businesses may apply if their tax debt is $25,000 or less.
2. Try calling the IRS at 1-800-829-1040.
3. Mail to the IRS form 9465 or an Installment Agreement Request.
4. Consult with a tax specialist especially one who is familiar with ins and outs of debt relief so she or he can help you settle your tax obligation.

What are the different types of Installment Agreements?

Guaranteed Installment Agreement 

This  might be an easy plan to apply. Why? If you met the criteria, then you’re in. If your tax liability is $10,000 or less and if within three years (Collection Statute Expiration Date or CSED), you are able to pay it off inclusive of interests and penalties than you qualify. Individuals with tax debts are the only ones accepted in this scheme.

 Streamlined Installment Agreements (SIA)

This is applicable to those who owe $100,000 or less. Businesses that have a liability of $25,000 or less and are currently active may also avail of this agreement. Those in a sole proprietorship and carry more than $25k in debt can also look into this option. The payment period is 84 months for sole proprietors and qualified individuals. It’s 36 months for businesses. Streamlined Installment Agreements don’t need financial disclosure.

Financially Verified Installment Agreements

  If you initially got rejected and are unable to qualify for a SIA, then look into Financially Verified Installment Agreements. Financial disclosure is necessary to describe your income, assets, debts, and expenses, unlike the SIA. You’ll most probably need help from a tax professional due to the loads of documentation required.

 Partial Payment Installment Agreements (PPIA)

It offers more affordable monthly payments than the usual agreement. Easier to obtain compared to an Offer in Compromise, your financial condition will be monitored by the IRS every 2 years.

Direct Debit IRS Installment Agreements (DDIA)

 Your monthly payments will be debited form your bank account through Direct Debit IRS Installment Agreements (DDIA). If you are seeking the withdrawal of a tax lien and your tax debt is $50,000 or less, then this is the agreement for you. More than $50,000, a payroll deduction or a direct debit is required by a SIA.