Form 9465: Installment Agreement Request Definition

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Form 9465: Installment Agreement Request Definition

What Is Form 9465: Installment Agreement Request?

Many Americans submit their tax returns each year and realize that they owe more income tax than they can afford to pay right now. Furthermore, many people owe past taxes and have no clue how to pay them.

Fortunately, the Internal Revenue Service (IRS) provides a scheme that enables taxpayers to pay their taxes in monthly payments rather than one huge, one-time payment. If you find yourself in this situation, you may execute an installment agreement by completing Form 9465: Installment Agreement Request with the IRS. However, bear in mind that penalties and interest on the outstanding sum will continue to accrue until the taxes are paid.

Key Takeaways

  • Provided a taxpayer owes taxes but cannot pay them all at once, they may submit Form 9465 to set up an installment plan if certain requirements are met.
  • This assists taxpayers who are unable to make a lump sum payment.
  • Generally, payment agreements must be completed in 72 months or less, depending on the amount owed.
  • If you owe $50,000 or less, you may also forego completing Form 9465 and instead complete an onlinepayment arrangement application.
  • Penalties and interest on the late amount will continue to accrue until you pay it off.

Who Can File Form 9465: Installment Agreement Request?

If a taxpayer meets certain qualifications, he or she may submit Form 9465 to establish a monthly installment payment plan. Any taxpayer owing less than $10,000 will have their installment payment plan application accepted automatically, subject to the following conditions:

  • To be eligible for this arrangement, the taxpayer must have submitted all previous tax returns.
  • Within the last five years, the taxpayer has not enrolled into an installment payment plan.
  • The taxpayer is unable to pay all of his or her taxes when they are due.
  • The ability to pay off the total outstanding sum within three years is required.

If you owe more than $50,000, you must file on paper and submit a completed IRS Form 9465 with original signatures. You may do this by adding it to the front of your tax return when you file it. The form may also be submitted independently at any time.

Where to Get Form 9465: Installment Agreement Request

All pages of Form 9465 are available on the IRS website.

If you owe $50,000 or less in taxes, penalties, and interest, you may also forgo completing Form 9465 and instead submit an onlinepayment agreement (OPA) application.

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Form 9465.

Taxpayers who fall behind on their payment plans may appeal for reinstatement, but they cannot disregard their existing arrangement by entering into a new one.

Who Should Not File Form 9465: Installment Agreement Request

Individuals who are currently paying payments under an installment plan with the IRS are unable to utilize Form 9465 and must call the IRS at 1-800-829-1040 if they need to make arrangements for further payments. Individuals who are in bankruptcy and wish to make an offer-in-compromise should also call instead of completing Form 9465.

Whether you can utilize Form 9465 or not, there are a number of options available to you if you get an unexpected IRS charge.

Special Considerations When Filing Form 9465

Setting up an Installment Plan

Repayments must generally be completed within 72 months or less, depending on the amount owed. The IRS does not provide taxpayers with free installment arrangements. There is also a one-time setup cost. The amount is determined on how you pay. Here are your options:

  • If you set up an online payment arrangement and pay by direct debit, you will save $31.
  • If you do not set up an online payment arrangement but pay by direct debit, you will be charged $107.
  • $149 if you set up an online payment arrangement but do not pay via direct debit.
  • $225 if you do not set up an online payment arrangement and do not pay via direct debit.

It is also $225 if you set up a payroll deduction for what you owe, and you must also complete IRS Form 2159: Payroll Deduction Agreement.

For low-income persons who make direct debit payments, the IRS waives the $31 online setup cost. Low-income taxpayers pay a lower price—$43 instead of $149—if they do not pay by direct debit, and the fee may be cancelled completely.

If the IRS first determines that you do not satisfy the conditions for the lower cost, you may request reconsideration by submitting Form 13844 Application for Reduced User Fee for Installment Agreements.

Modifying or terminating the installment arrangement costs $89 ($43 for low-income taxpayers). In addition, until the outstanding sum is paid off, interest and penalties are added.

Penalties for Unpaid Taxes

On a quarterly basis, the IRS levies a daily compounding interest rate equal to the short-term federal funds rate + 3%. In addition to the interest, the IRS will levy a failure-to-pay penalty of 0.5% every month or portion of a month, up to a maximum of 25%, on the outstanding sum. The penalty for taxpayers who file on time and are on an installment plan is reduced to 0.25% for each month the installment plan is in existence.

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Penalties and interest may easily equal 9% to 12% per year, and taxpayers must be prepared to pay this amount in addition to their main sum. As a result, taxpayers are strongly advised to make additional payments over the minimum monthly amount whenever feasible.

Example of Penalties

Fred files his 2020 taxes in April 2021 and owes a total of $7,000 in taxes. He attaches Form 9465 to his return and sets up a 36-month installment payment plan. The IRS will charge Fred a 6% interest rate on the outstanding debt if the federal funds rate is 3%.

If the failure-to-file penalty is 0.5%, he will additionally pay another 6% in penalties yearly until the total is paid off—12% of $7,000 is $840, albeit this figure will drop monthly as the principle is repaid.

Methods of Payment

Taxpayers may pay using a variety of ways. They have the option of sending personal checks, cashier’s checks, or money orders. They may also debit money straight from their bank accounts or pay with a credit card. The Electronic Federal Tax Payment System (EFTPS) is another option (this requires separate registration).However, it is important to note that the payment must be done by the stipulated date each month in the agreement.

Payments are accepted between the first and last days of each month. If the agreement states that the taxpayer must pay by the 15th of each month and the payment is not made, the agreement is regarded to be in default. To guarantee prompt receipt, clients who pay by check or money order should ship their payments at least seven to ten business days before the due date.

The IRS, on the other hand, has just improved its website to enable taxpayers to amend their payment arrangements online. Individuals may now change their payment dates as well as the parameters of their agreement, such as the mode of payment and other data. Authorized representatives may also visit the site on their customers’ behalf.

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Benefits of Installment Plans

The benefit of an installment plan is self-evident: it allows taxpayers additional time to pay down their federal taxes in a timely way. Any collection attempts by the IRS or private collection agencies will stop as long as the provisions of the agreement are followed and the taxpayer is able to make their payments.

Individuals who meet specific financial criteria may also be granted a six-month delay for completing their tax returns and maybe paying their tax liabilities.

How Do I Set Up a Payment Plan With the IRS?

How Much Interest and Penalties Does the IRS Charge on Payment Plans?

Short-term payment plans are usually free of charge. A long-term payment plan via direct debit costs $31 to set up online and $107 to set up by phone or in person. The set-up charge for other means of payment is $149 online or $225 by phone or in person. For low-income earners, these expenditures are considerably reduced. It should be noted that any accumulated fines are also due.

Can I File Form 9465 Electronically?

Yes, but only if the amount you owe is less than $50,000.

What Is the Difference Between IRS Form 9465 and IRS Form 433-F?

Form 433-F specifies the amount of interest and penalties you must pay. Form 9465 enables you to set up an installment plan to repay such expenses. Taxpayers who owe more than $50,000 must file a 433-F with their Form 9465.

The Bottom Line

Taxpayers who owe money to the IRS do not need to worry about how to pay their payments. Although fines and interest might mount up over time, the application procedure for installment agreements is rather short and easy. Individuals who are unable to pay their federal tax obligation and do not make agreements with the IRS may face the IRS collection procedure as well as more penalties and interest than if they had made plans to pay in installments in advance. Consult IRS Topic No. 202: Tax Payment Options for further information.

Form 9465 is available on the IRS website or by calling 1-800-829-1040.

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