Posted by The TaxAdvocate Group, LLC

How to Establish a Payment Plan With The IRS

How to Establish a Payment Plan With The IRS

This article explores a step-by-step plan to set up a payment plan with Uncle Sam.

File Outstanding Returns 

All your tax returns must be filed before your instalment agreement will be accepted. Even if you cannot afford the total amount, make sure to file the tax. There is an 0.5% penalty for failure to pay and a 5% penalty for failure to file.


Apply for Installment Agreement 

There are online payment agreement application tools with which users can apply for an instalment agreement. It is also possible via submission of Form 9465 the mail or Uncle Sam's office. 

Provided your tax debt is not above $50,000, this option is available for you. If your balance is higher, you will have to tender your financial information to request an instalment agreement.

Pay the Fees

If you want to avoid paying the instalment agreement fee, aim to pay the balance in 120 days. There will be fees charged as follow if your payment plan is more extended:

  • Direct debit withdrawal and online application is charged at $31

  • Direct debit withdrawal for mail, phone and in-person application is $107

  • Online application to take care of various payment method is $149

Taxpayers with earnings below 250% of the federal poverty threshold will qualify for a reduction of $43. This can be reimbursed if you meet the instalment agreement terms. 

Estimate Monthly Payments 

If you delay too much in paying your tax balance, you will have excessive interest and fees. With tax debt below $50,000, you can have a monthly payment amount in the instalment agreement with a basis of what you can afford. The amount should be your entire IRS account balance divided by seventy-two. 

There is a provision for people with $10,000 in debt to apply for an instalment agreement (guaranteed). This plan does not tie you to a definite monthly payment amount provided you pay every month and complete it within three years. This plan needs financial documentation before one can qualify.


File an Appeal if your Installment Agreement is Rejected 

Uncle Sam will often agree to a reasonable payment plan that is in line with the above specification. There are, however, times that some agreement proposal might not be honoured, and reasons could be:

  • Your financial information is false or not complete

  • Your living expense is beyond what Uncle Sam considers reasonable, like excessive spending or tuition fees for private school

  • Not fulfilling a past instalment agreement 

For the rejected proposal, you can contact a tax professional such as THE TAXADVOCATE GROUP, LLC. for help or appeal with Uncle Sam via the information on IRS notice on how to appeal.


Fulfil Your Installment Agreement 

If you obey the terms and conditions of your instalment agreement, you can avoid IRS collection actions. Here are measures to help:

  • Make the least minimum payment every month.

  • File and be sure to pay your tax return every time. if paying the tax assessed for subsequent years will be difficult, you can petition Uncle Sam to correct your amendment 

  • Give your consent for your future tax refunds to take care of your outstanding debt.

Consider other Payment Options 

People that cannot pay the monthly payment might qualify for the offer-in-compromise. With this, Uncle Sam agrees that you pay little compared to what you owe. This involves making an offer equal to the least money Uncle Sam can expect from you before the expiration of the statute of limitation. 

On the condition that your tax debt payment will make you financially miserable, you can request the CNC status (Currently Not Collectible). To qualify for this, one needs to tender information about income, assets and living conditions. While the CNC status stops all collection activities from Uncle Sam, it will be reviewed periodically. 

Also, there are cases when the tax debt that is due can be discharged during bankruptcy. One needs to contact a qualified bankruptcy attorney to shed light on this option and know the implications. 



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