Requesting a partial payment installment agreement with the Internal Revenue Service can be easier and less time-consuming than requesting an offer in compromise. In a partial-payment installment agreement, the taxpayer makes regular monthly payments to the IRS, but the payments do not pay off the tax debt in full. After the terms of the installment agreement are fulfilled, the remainder of the tax debts are forgiven. Partial-payment installment agreements are one way to get out of tax debt.
Time Required: 2 hours
- Consult with a tax professional who has experience in handling tax debts. You will need to know what your options are for settling your tax debts, and you may need help in negotiating the best possible monthly payment.
- The tax professional must know about the laws governing IRS collection of tax debts, how the IRS evaluates installment agreements, and what all the options are for resolving tax debt problems. "Taxpayers should be looking for a tax professional with significant experience in IRS collection matters," according to David Bauman, an enrolled agent with JK Harris.
- Find out how much you owe in unpaid taxes. Call the IRS or get out copies of your tax returns to verify the amount you owe. The amount you owe includes your original tax due, plus penalties and interest.
- Fill out Form 9465, Installment Agreement Request. Download a PDF version of the form. Your tax professional will help you calculate the monthly payment amount to offer.
- Fill out Form 433-A, Collection Information Statement. Form 433-A is used for partial-payment installment agreements and for offers in compromise. Because both programs use the same basic information, this is a good opportunity to find out which tax debt strategy is better for you.
- Attach three months of backup documentation for all income and expenses reported on Form 433-A.
- Write a letter stating your request for a partial-payment installment agreement.
- Submit your written request along with Form 9465 and Form 433-A to the IRS Revenue Officer handling your case, to the Automated Collection System unit, or to your nearest IRS Service Center.
- The IRS will respond to your request in about 30 days.
- Make payments each and every month. You can pay by check, money order, credit card, EFTPS or automatic withdrawals from your checking account.
- I recommend using EFTPS or automatic withdrawals from your checking account. Checks mailed to the IRS Service Center sometimes get lost. Also using these two electronic payment options will reduce the chance of clerical errors.
- Congress authorized the partial payment installment agreement option in the American Jobs Creation Act of 2004.
- The IRS implemented the partial payment installment agreement option on January 17, 2005. This is a fairly new payment option.
- To calculate your monthly payment amount, you will need to know your outstanding tax debt balance, the remaining statute of limitation on collecting that debt, and the reasonable collection potential over the remaining statutory period. This is a rather complex calculation. An experienced tax professional can help you figure out the best payment amount.
- Before the IRS can approve your partial payment installment, you will need have filed all your tax returns, and be current on your income tax withholding or estimated tax payments. You will need to file any back taxes before requesting an installment agreement.
- A partial payment installment agreement is a contract between you and the IRS. The IRS can re-evaluate the amount of monthly payments every two years.
What You Need
- Copies of your tax returns.
- A good idea of how much you can afford to pay each month.
- Your checkbook or a voided check if you are setting up automatic withdrawals.
- Register with EFTPS if you want to use the IRS bill pay system.