What is IRS Tax Form 9465?
Published on September 26, 2024
by Deborshi Choudhury, EA
Deborshi Choudhury, an IRS Enrolled Agent with 16 years of expat tax experience, specializes in U.S. tax preparation, tax planning, and tax advice for U.S. citizens and Green Card holders living and working in the UAE and Canada.
Table of Contents
Can I set up a payment plan with the IRS for tax due?
Most of the time, yes. Form 9465 is used when you need to set up a monthly payment plan (installments) with the IRS, allowing you to pay your taxes over time instead of all at once.
This form helps you break down your tax bill into smaller, more manageable payments, which is useful if paying the full amount right away would cause financial hardship.
By agreeing to an installment plan, the IRS won’t take serious actions such as seizing your assets as long as you stick to the agreed payments.
Who is eligible to use Form 9465?
You can use Form 9465 if you cannot pay the full amount you owe, as shown on your tax return or on a notice the IRS sent you.
If your debt is within US$50,000, you’re generally eligible for a payment plan without needing to provide lots of extra paperwork. If you owe more than that, you may still qualify but will need to share more financial information with the IRS.
The IRS will use this information to decide how much you can afford to pay each month.
This form can also be used by businesses, but the threshold is lower—businesses must owe US$25,000 or less to qualify.
What are the different types of installment agreements available?
Short-term payment plans and long-term installment agreements under Form 9465 differ based on how long you have to pay and the amount owed
- Short-term payment plan: This plan allows you to pay your taxes within 120 days (4 months). You can apply if you owe less than US$100,000 in combined taxes, penalties, and interest. The good news is that there is no setup fee for short-term payment plans, though interest and penalties still accumulate until the debt is fully paid.
- Long-term installment agreement: If you owe less than US$50,000 and need more time to pay, you can opt for a long-term payment plan. This allows you to pay over several months or even years. However, there’s usually a setup fee for this option, and interest and penalties will keep adding up while you’re paying it off.
What if I’m way behind on my U.S. tax returns?
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Are there any fees or penalties for using Form 9465?
Yes, there are some fees involved when you use Form 9465 to set up a payment plan with the IRS.
For long-term payment plans, the setup fee is about US$31 if you agree to automatic payments from your bank account (direct debit). If you choose other payment methods, the fee can be around US$149.
For low-income taxpayers, the IRS might lower or even waive these fees, depending on your financial situation.
It’s important to remember that even though you’re on a payment plan, the IRS will still charge interest on the unpaid taxes and may also add penalties if you miss any payments.
Can I include more than one year’s tax debt in a single installment agreement?
Yes, you can. If you owe taxes from multiple years, you can combine all the amounts into one payment plan.
When you fill out Form 9465, you’ll enter the total amount owed, covering all the tax years you want to include. This makes it easier to consolidate your payments instead of setting up a separate plan for each year.
What happens if I miss a payment after submitting Form 9465?
If you miss a payment under your installment plan, the IRS might cancel the agreement, which could result in the full balance becoming due immediately. Additionally, penalties and interest will continue to add up.
If you know you’re going to miss a payment, it’s best to contact the IRS ahead of time. They might let you adjust the payment terms or give you another option to keep your agreement in place.
However, if you consistently miss payments, the IRS could take further actions, like freezing your bank account.
How long does it take for the IRS to approve an installment agreement?
After you submit Form 9465 to request a payment plan with the IRS, it typically takes around 30 to 60 days for the IRS to approve your request.
The time can vary depending on how you file the form (online or by mail) and your specific situation. During this time, you should continue making payments or pay as much as you can to avoid extra penalties or interest.
If the IRS needs more information from you, it may take a bit longer for approval.
Can I adjust the terms of my payment plan after it’s been set up?
Yes, if your financial situation changes, you can request to change your payment plan with the IRS. For example, if your income increases or decreases, you may want to adjust the amount of your monthly payments.
To do this, you can contact the IRS or file a new Form 9465. Just remember, changing your plan may come with extra fees, and the IRS will review your request based on your financial situation and payment history.
What are the benefits and drawbacks of using Form 9465 over other IRS payment options?
Benefits
- Monthly Payments: Instead of paying your entire tax bill upfront, you can spread the total amount into smaller payments, making it easier to manage.
- Avoid IRS Actions: By setting up a payment plan, you prevent the IRS from taking more serious steps, like taking money from your paycheck (wage garnishment) or your bank account.
- Flexible Options: The IRS offers short-term and long-term payment plans, giving you flexibility depending on how much you owe.
Drawbacks
- Interest and Penalties: Even though you’re on a payment plan, interest and late payment penalties continue to add up on the remaining balance, which can increase what you owe.
- Set-up Fees: The IRS charges a fee for setting up a payment plan, and the amount varies depending on your payment method (e.g., direct debit costs less).
- Missed Payments: If you miss any payments, the IRS can cancel your plan, and you might face more penalties or IRS actions.
While Form 9465 makes it easier to pay your tax bill, it doesn’t stop interest or penalties from adding up, and there are fees involved for setting it up. There are also other options like Offer in Compromise or Currently Not Collectible status, but those are harder to qualify for.
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