All About The IRS Installment Agreement

March 14, 2024 by Kaylie Jonutz
Installment Agreement

How can you solve a tax liability and avoid other IRS actions, such as liens and levies? One answer to this is setting up an IRS installment agreement!

An IRS Installment Agreement can be very easy or complicated, depending on your circumstances.

 

  • If you owe the IRS less than $50,000, the IRS will accept any installment agreement offer you make if it pays off the balance in six years or less. This is through the IRS Fresh Start Initiative.
  • If you owe the IRS more than $50,000 or cannot pay off the amount in 6 years or less, the IRS will require you to complete a Collection Information Statement (Form 433A). This form exists so the IRS can determine what they believe your monthly Installment Agreement payment amount should be.


If you need to fill out Form 433A, be prepared to provide detailed financial information. The form will require you to disclose all your bank account(s) information. The IRS may ask for copies of your monthly bank account statements for the last 3 to 6 months, depending on if you are a wage earner or self-employed. In addition, the IRS will want to know about your wage earnings and any other income you receive. Taxpayers will also need to disclose any investments they have and their value. This includes investment accounts, collector items of value, and any digital assets such as bitcoin or other cryptocurrency. Form 433A will also ask about your monthly household expenses, such as utility bills, rent or mortgage payments, food costs, car and transportation expenses, health insurance, etc. The IRS has national standards for items such as food and clothing. Along with this, there are also local standards for items such as housing, utilities, and vehicle operating expenses. If your actual expenses are higher than these standards, it is within the IRS's discretion to allow the full amount of the expense you claim. It depends on the person you are working with and if they will allow that.

Generally, taxpayers who owe $50,000 or less in combined tax, penalties, and interest and have filed all their required returns may apply for an installment agreement on the IRS website. Installment agreements can also be applied for by mail by submitting a completed Form 9465, Installment Agreement Request, or by calling the IRS. If you submit your installment agreement online, you will most likely receive an immediate answer as to whether the IRS has accepted or rejected your request. If you submit your request by mail and do not hear from the IRS after 30 days, you will want to contact the IRS for an update.

While you are waiting for the IRS to respond to your request, please be mindful of any other IRS letters you may receive. If you receive a Notice of Intent to Levy, it is very important that you file a request for a Collection Due Process, or “CDP” hearing in a timely manner. If you do not timely request a Collection Due Process hearing, you are giving up your rights to appeal a decision and ultimately take the IRS’s decision to Tax Court. Additionally, if you receive a Notice of Federal Tax Lien, you can request a Collection Due Process hearing. As with the Notice of Intent to Levy, you must request a Collection Due Process hearing timely. You want to request a Collection Due Process hearing as you do not want to give up your rights to offer the IRS a collection alternative. Also, if the IRS doesn’t agree with the installment agreement amount that you proposed and do not request a Collection Due Process hearing, you are giving up your rights to appeal a decision and ultimately take an IRS decision to Tax Court.

If you cannot come to an agreement with the IRS on an installment agreement, you can request an appeal. This can be either through a request for a Collection Due Process hearing if you received a Final Notice of Intent to Levy or a Notice of Federal Tax Lien. If you’ve already received these notices and the time to request a Collection Due Process hearing has passed, you can request an appeal through the IRS Collection Appeals Program. This program is less formal than the Collection Due Process hearing. Keep in mind that, with the Collection Appeals Program, you cannot appeal the determination to Tax Court as you can with a Collection Due Process hearing.

Keep in mind that this is just a little introduction to federal installment agreements. If you would like more information or need help with your Installment Agreement, TaxAudit’s Tax Debt Relief (TDR) program specializes in collection issues. To get started, click here and we will connect you with a qualified tax professional who will offer a brief, no-obligation consultation on how to get started with resolving your tax debt.

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