How to Pay Back Taxes in Installments

by Contributor ; Updated July 27, 2017
Pay Back Taxes in Installments

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How to Pay Back Taxes in Installments. You've prepared your income tax return and you discover that you owe more than you can afford to pay right now. Send in your tax return with a contract to pay in monthly installments.

Creating the Contract

Step 1

Fill out and sign your federal income tax form.

Step 2

Print a copy of Form 9465, Installment Agreement Request (see irs.gov). The form is also available at IRS offices and in Package X.

Step 3

Fill in your name or names, Social Security number or numbers, and address.

Step 4

Omit the lines that ask for your phone numbers, bank and employer if you find this invasive. This information is not required.

Step 5

Enter the form number that you used - 1040, 1040A or 1040EZ; the tax year ' 1999 if it's the current tax return; and the amount of tax you owe.

Step 6

Decide how much money you can send in now. Make this proportionate to your bill. You need to show that you are making a good-faith effort to pay.

Step 7

Determine how much you can pay each month. Make it a realistic amount, but try to pay in full within 12 months.

Step 8

Enter the day of the month the IRS will receive your monthly payments. Base this on your payday and the speed of the mail.

Step 9

Fill in your bank information only if you want the payment automatically deducted from your bank account each month.

Step 10

Sign the form; both spouses must sign if you're married filing jointly.

Step 11

Attach the form to the front of your income tax return.

Step 12

Mail the forms to the IRS with your initial payment.

Fulfilling the Contract

Step 1

Expect the IRS to assess a $43 fee for setting up the installment plan.

Step 2

Expect to be charged interest on the balance due.

Step 3

Send in subsequent payments monthly even if you don't receive acknowledgement of the contract or a monthly statement. The IRS does not bill you each month.

Step 4

Expect the contract to be terminated if you miss payments or send them late.

Tips

  • Form 9465 is a formal contract. The IRS will automatically accept the contract if the payment plan you present on the form indicates that you are serious about paying off the debt.

Warnings

  • Most states don't have a mechanism for installment payments. You will probably have to pay state income taxes in full.

About the Author

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