Form 9465
Published on November 13, 2024
by Grace Lorraine Angeles
Grace Lorraine, an IRS Enrolled Agent and CPA with 13 years of expat tax experience, specializes in US tax preparation, tax planning, and tax advice for US citizens and Green Card holders living and working abroad.
Table of Contents
Is it possible to arrange an IRS payment plan for tax owed?
Yes, most people can arrange a payment plan with the IRS using Form 9465, allowing you to spread your tax balance into manageable monthly payments.
This option can be helpful if paying the entire amount upfront would create a financial burden. By setting up an installment plan, the IRS won’t take serious collection steps, like garnishing wages or seizing assets, as long as you stick to the agreement.
Who can use Form 9465 for a payment plan?
Form 9465 is available for anyone who owes the IRS and can’t pay in full right away.
If you owe under US$50,000, you’re usually eligible without needing to provide detailed financial information. For balances over US$50,000, you may still qualify but will need to submit additional financial documentation so the IRS can assess what you can afford monthly.
Businesses with tax debts up to US$25,000 can also apply for an installment plan.
What are the types of IRS installment agreements?
There are two main types of installment agreements for individuals who need a payment plan, each with different terms.
- Short-Term Payment Plan: This option is available if you owe less than US$100,000 in combined taxes, penalties, and interest, and it allows you to repay within 120 days. There’s no setup fee, though the IRS will still charge interest and any applicable late penalties until the balance is fully paid.
- Long-Term Installment Agreement: For balances under US$50,000, the long-term plan provides a longer repayment period, even allowing for several years. A setup fee applies here, and interest and penalties continue to add up as you pay down the debt.
Are there fees or penalties for setting up an IRS payment plan?
Yes, payment plans usually come with some fees:
- For long-term plans, there’s a setup fee of around US$31 if you opt for automatic bank payments. If you prefer a different payment method, the fee is about US$149.
- For qualified low-income taxpayers, the IRS may reduce or waive these fees based on financial need.
- The IRS also charges interest on any unpaid balance, and missed payments may trigger additional penalties.
I want to know more about US taxes abroad
Can I combine taxes from multiple years into one plan?
Yes, the IRS allows you to consolidate tax debt from several years into one installment agreement.
When filling out Form 9465, you enter the total amount owed across all the years you want to include.
What if I miss a payment after setting up an agreement?
If you miss a payment under your plan, the IRS may cancel the agreement, which would make the remaining balance immediately due. You’ll also face continued interest and potential penalties.
If you know you might miss a payment, it’s best to reach out to the IRS right away. They may adjust your terms or offer an alternative to keep your agreement active.
However, missed payments over time can lead the IRS to take further steps, like placing a lien or freezing your bank account.
How long does it take to get approval for an IRS payment plan?
The IRS normally takes around 30 to 60 days to approve a payment plan. Approval time may vary based on how you file (online versus by mail) and your individual circumstances.
In some cases, the IRS may ask for more information, which could take a bit longer. During this waiting period, it’s a good idea to pay what you can to minimize any extra interest and penalties.
Can I change my payment plan if my finances change?
Yes, if your financial situation changes, you can adjust your payment plan.
For example, if your income increases or decreases significantly, you can contact the IRS or refile Form 9465 to update your payment amount. The IRS may charge a fee to change the plan, and it will review your request based on your current financial standing and payment history.
What are the main pros and cons of using an IRS payment plan?
Advantages
- Flexible Monthly Payments: Instead of paying your tax bill in one lump sum, the plan lets you pay it over time.
- Avoids Harsh IRS Actions: Setting up a payment plan can prevent serious collection actions, such as wage garnishment or a bank levy.
- Options for Short- and Long-Term Plans: The IRS provides both short- and long-term options, which allows you to choose the best plan for your needs.
Disadvantages
- Interest and Penalties Continue: Even with a payment plan, interest and late payment penalties will keep adding up until you’ve fully paid your balance.
- Setup Fees: Depending on the payment method, there are fees to set up a plan. A direct debit plan is generally cheaper than other payment types.
- Risk of Plan Termination: Missing payments can lead to the IRS canceling your plan, which could bring additional penalties and collection actions.
