Okay, so you are in this situation. You know that you owe more than you can
pay. You have determined that you can pay some of the bill, but not all of it.
So, what do you do? Well, you ask the IRS to set up an installment agreement
with you so that you can make monthly payments. And, as with most things with
the IRS, there is a form for ask for the installments.
If you owe less than $25,000 in taxes, Form 9465 must be added to your
federal tax return. This form is pretty straight forward. It asks for basic
information such as how money much you owe overall, how much money you are
sending in with your tax return, and the amount that you can pay each month.
Now, if you only owe a few hundred dollars, you can probably get a way with
telling the IRS that you can only pay $25 or $50 per month. However, don’t try
to put in that you can only pay $10 a month, unless you have some special
circumstance. Typically, the IRS tries to get outstanding balances paid in
about three years. Of course, the sooner you get it paid off, the less you pay
in interest and penalties.
Now, if you owe more than $25,000 in taxes, there is some additional
information that the IRS needs. In addition to filing Form 9465, you also need
to file Form 433F. This form tells the IRS about all of your assets. Of course,
if you owe more than $25,000, you probably need to be working with a tax
professional.
In addition to the interest and penalties, there are fees for setting up the
installment agreement. There is a $43 initial fee. There are other fees if an
installment agreement has to be reinstated due to non-payment or other
circumstances.
Finally, it is important to remember that filing the forms for the
installment agreement is simply asking for the re-payment option. The IRS can
adjust the agreement or make other arrangements. However, if everything on your
tax return is normal, you should not have a problem getting the installment
agreement.