The Basics of Individual Tax Payment PlansPublished:
Do you need to set up a tax payment plan with the IRS but are afraid of what it might entail? Relax! The whole process is fairly simple once you break it down. Let’s take some of the mystery out of it by examining what you’ll go through when you sign up for a tax payment plan.
You’ll run into two main forms when you start to set up a tax payment plan with the IRS. The first is IRS Form 9465. If you owe less than $25,000 on your taxes, you only need to fill out this single form.
It asks simple information like your personal info as well as for simple bank information. The form will also ask you to fill in how much you owe in taxes and how much you would like to pay each month.
The second form is IRS Form 433-F. If you owe more than $25,000, you must complete this along with the 9465. The 433-F will ask you more in-depth questions about your finances, such as real estate you own and any investments you have.
When filling out the 9465, write down how much you think you can possibly stand to pay back each month. The reason for this is you will acquire interest of at least 5% during your tax payment plan. The quicker you pay back your taxes the less you will pay in the long run.
There is a possibility your tax payment plan won’t be accepted. This is also why you must try and pay back as much as possible each month. Generally if you owe under $10,000 you should be approved. The payment agreement cannot extend more than three years and you must keep up with other tax priorities.
One last thing: if it’s possible to pay your taxes within 120 days, you can avoid fees and interest by doing so. Skip the tax payment plan in this case.