An installment agreement allows the taxpayer to break down their tax debt into manageable payments. Usually an installment agreement requires equal monthly payments based on the amount of taxes owed, the amount of money the IRS can collect at one time, and the amount of time they are allowed to collect the funds from the taxpayer. Installment agreements are not an ideal way of paying a tax debt, since the taxpayer will still accrue late payment penalties and interest over the life of the agreement.
Form 9465 can be used to request an installment plan, but it should not be used if the taxpayer plans to pay their tax debt within 120 days or if they wish to use the IRS Online Payment Agreement Application to apply for an installment agreement.
The IRS will notify the taxpayer within 30 days of receiving the agreement if it has been approved or denied. Agreements for less than $10,000 will generally be accepted as long as:
- During the last 5 years, the taxpayer (and spouse if filing jointly) has timely filed all income tax returns, paid any amount due, and have not previously used an installment agreement.
- The IRS determines that the taxpayer cannot pay the taxes owed when they are due in full, and the taxpayer gives the IRS any information needed to make the determination.
- The taxpayer agrees to pay the full amount within 3 years and agree to abide by tax laws while the agreement is in effect.
To create Form 9465, from the Main Menu of the tax return (Form 1040) select:
- Miscellaneous Forms
- Installment Agreement Request (9465)
- Basic Information - Review and update the information here as needed.
- Amount Owed from tax return(s)/notice(s) - Enter the balance due on this return.
- Additional Balances Due - Enter the total of any existing installment agreement plus any other adjustments or balances due.
- Amount of Payment made with Request - Enter the amount the taxpayer is paying right now, either by check or by direct debit in the return. Note: If paying by direct debit, this amount must match the amount indicated in the electronic payment information.
- Minimum Monthly Payment Amount - The minimum monthly payment equals the sum of the amounts owed less the amount being paid with the return divided by 72 months.
- Amount of Payment each Month - Enter the amount the taxpayer is willing to pay each month. If there is an existing installment agreement, this amount includes the total of all liabilities. If no amount is entered the IRS will use the minimum. If the amount entered is less than the minimum, an additional menu line will display:
- Increase Payment each Month to - Enter a revised monthly payment proposal amount that is at least equal to the minimum.
- Day Payment will be made each Month - Enter the day of the month (from 1-28) the taxpayer will make the payment. This includes payments by direct debit or otherwise. An entry here is required.
- Payments made using Direct Debit - Select to enter the bank information for payment by direct debit.
- Make you payments by payroll deduction - Select Yes to indicate the taxpayer has completed Form 2159 (available at the IRS here) for their monthly payments to be deducted by their employer. Attach a PDF copy of Form 2159 to the return in the Other Categories menu under Personal Information.
- Additional Information - Select to complete Part II of the form if all three of these things are true:
- The taxpayer defaulted on an installment agreement in the past 12 months;
- The taxpayer owes more than $25,000 but not more than $50,000; and
- The amount the taxpayer can pay each month is less than the calculated minimum.
Note: This is a guide to creating Form 9465 in the TaxSlayer Pro program. This is not intended as tax advice.