Can't Pay Full Income Tax Owed

If payment of the Federal income tax due would cause some hardship or cash flow problems for your household budget, the IRS does offer an installment payment option.  IRS Form 9465 "Installment Agreement Request” can be used to request a monthly installment payment plan.

Form 9465 is submitted to the IRS as an attachment to your Federal Form 1040 return filing.

You will need to provide the following information on your Form 9465:

  1. Amount of your down payment (which you will pay either via a direct debit or mailing a check).
  2. Amount you agree to pay each month.
  3. Number of months that you will make your monthly payments (cannot exceed 72 months).
  4. Day of the month you will make your monthly payments (must be between 1 and 28; 29, 30 and 31 are not allowed).

You can choose any amount you like for the down payment and the monthly payment amounts.  My only caution is that you be “reasonable” with the amounts that you propose.

For example, supposed you owe the IRS $12,000.  You could propose to pay a down payment of $1,000 with your Form 1040 return, then monthly payments of $200 per month for 55 months. Or any other reasonable combination. The down payment would be made via either direct debit or mailing a check. You may opt to make the monthly payments via either direct debit or mailing a check. Your choices will be recorded on your Form 9465.

The IRS will charge you interest at the rate of 14% annually. You may prepay any amount you choose at any time without incurring any penalties or charges. Prepayment will also reduce the amount of interest that your account will be assessed.

The IRS will usually let the taxpayer know within 30 days after they receive your request whether is approved or denied. If the IRS approves your request, they will send you a Notice detailing the terms of your agreement and requesting a fee of $120 ($52 if you make your payments by direct debit). However, you may qualify to pay a reduced fee of $43 if your income is below a certain level.

Neither the New Hampshire DRA nor the Massachusetts DOR offers an installment payment plan option at this time.

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