Sometimes you do your taxes on April 14th or 15th and you discover you owe the IRS (you actually owe the United States Treasury, the IRS is just there to bust your kneecaps if you don’t) more than what you can get your hands on in one day. Maybe you put too many exemptions or you underpaid your estimated taxes, whatever the case, you’re in a pickle and you need some help. The IRS sympathizes. They aren’t heartless automatons there just to suck the marrow from your bones, they’re willing to lend you a hand and let you pay off what you owe in installments. Here how you set that up. (and investigate why you had this shortfall so you don’t have to do it again next year!)
You have two options in setting up an installment agreement, through an online payment agreement webapp or through the telephone. Before you set up the installment agreement, you have to do some homework and make sure you can pay the one-time setup fees.
To set up the payment plan, you have to first figure out how much you owe. If you don’t know, you can call the IRS to request copies of your tax returns so you can figure that out. The total amount should be the original tax you owe, plus penalties and interest. It may help to get an accountant or someone experienced with this type of math to help you out.
Request the Plan
After you have the amount, you can set up the installment plan in one of two ways:
- Call the IRS at 1-800-829-1040.
- Use the Online Payment Agreement Application . You can only use this if you owe less than $25,000. If you owe more, you have to call.
There is the third option of filling out Form 9465: Installment Agreement Request  and mailing it in but that takes longer, every day that passes is more interest and penalties tacked on. It’s better to use the online or call options.
According to Form 9465, there is a one-time fee based on how you plan on paying:
- Direct debit installment agreement – $52
- Payroll deduction installment agreement – $105
- Online payment agreement – $105
There is a possibility the IRS could request your request for an installment agreement but they do say that if you owe less than $10,000 and you 1) have timely filed all income tax returns and paid any income tax due, and have not entered into an installment plan in the last five years, and 2) the IRS determines you can’t pay the tax owed in full and you prove it, and 3) you agree to pay the full amount you owe within 3 years and comply with tax laws; then you will be okay.
Basically, it sounds like as long as you aren’t screwing with the IRS, have your ducks in a row, and aren’t trying to pull one over on them, they’ll approve it.