Set Up Installment Agreement with IRS: A Step-By-Step Guide

When it comes to paying your taxes, it`s not uncommon to find yourself in a situation where you owe more than you`re able to pay in one lump sum. Fortunately, the IRS provides an option for taxpayers to set up an installment agreement – a monthly payment plan that allows you to pay off your tax debt over time. Here`s everything you need to know to set up an installment agreement with the IRS.

1. Determine Your Eligibility

Not everyone is eligible for an installment agreement. If you owe less than $10,000, you can usually pay it off in full within 120 days and don`t need to set up an agreement. If you owe more than $50,000, you`ll need to provide financial information and potentially set up a direct debit agreement. If you`re somewhere in between, you`re likely eligible for a streamlined installment agreement.

2. Choose Your Payment Amount

When setting up an installment agreement, you`ll need to choose how much you can afford to pay each month. You should aim to pay off your tax debt as quickly as possible to minimize interest and penalties, but you should also be realistic about what you can afford. Use the IRS`s online payment agreement tool to calculate your monthly payment amount.

3. Submit an Application

To set up an installment agreement, you`ll need to submit an application to the IRS. You can do this online, by phone, or by mail. If you owe less than $50,000, you can use the IRS`s Online Payment Agreement tool to apply. If you owe between $50,000 and $100,000, you`ll need to submit Form 9465 and a Collection Information Statement (Form 433-A or Form 433-F). If you owe more than $100,000, you`ll need to contact the IRS directly.

4. Wait for Approval

Once you`ve submitted your application, the IRS will review it and either approve or deny your request. If your request is approved, you`ll receive a letter confirming your installment agreement and providing details about your payment plan. If your request is denied, you`ll receive a letter explaining why and what steps you can take next.

5. Make Your Payments

Once you have an approved installment agreement, it`s important to make your payments on time. Late payments can result in additional interest and penalties, and can even void your agreement. You can choose to make your payments by mail, online, or by setting up a direct debit agreement.

Setting up an installment agreement with the IRS can be a helpful way to manage your tax debt if you`re unable to pay it all at once. Just be sure to carefully review the terms of your agreement and make your payments on time to avoid any additional fees or penalties.