IRS Payment Arrangements Part 2: Installment Agreements

This is part two of a series of blogs on IRS payment arrangements. Most taxpayers utilize an installment agreement to pay their tax debt for obvious reasons. Such an arrangement allows monthly intermittent payments at an affordable amount, while addressing the issue with some forward resolution. The IRS charges a modest setup fee for an installment agreement.

Individual taxpayers must complete and mail Form 9465, Installment Agreement Request and Form 433-F, Collection Information Statement before entering into any installment agreement. Taxpayers then make monthly payments usually by direct debit or payroll deduction. Interests and late-payment penalties continue to accrue during the installment period, but the late-payment penalty is cut in half for any month an installment agreement is in effect.

An individual taxpayer may file Form 9465 at any time to request an installment agreement, but it is recommended that it is filed with a balance-due return, as this is the most efficient way of getting the quickest response from the IRS. The best-case scenario is for the taxpayer to pay as much of the balance as possible when filing the return to reduce interests and late-payment penalties, while then requesting an installment arrangment for the remaining balance. The IRS responds to a Form 9465 installment agreement request generally within 30 days. Taxpayers should continue to pay the IRS as much as possible during the time period in which they await a response.

There are certain circumstances where the IRS will request additional information from a taxpayer. These circumstances include the occasion where a taxpayer cannot pay the entire balance within the collection statute-of-limitation period, which is typically 10 years, or owes the IRS more than the $50,000. A taxpayer files Form 433-F if he or she owes more than $50,000 or did not agree to make payments by direct debit or payroll deduction.

Form 433-F requests detailed information about a taxpayer’s financial state. This form often requires additional documentation to verify the information contained within. The IRS utilizes Form 433-F to determine the amount a taxpayer can afford to actually pay. Businesses that owe more than $25,000 must  complete Form 433-B instead of Form 433-F.

If you live in the New York or the Tri-State area and have any questions about any possible tax deductions, call THE TAX EXPERTS at the Thorgood Law Firm For a FREE consultation, call 212-490-0704.IRS Payment Arrangements Part 2: Installment Agreements

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