When taxpayers are unable to pay their full tax bill by the April 15 deadline, they have the option to set up an IRS Form 1040 installment agreement. This allows taxpayers to pay off their tax debt in monthly increments rather than a lump sum.
To set up an IRS Form 1040 installment agreement, taxpayers must file Form 9465, which is available on the IRS website. The form requires the taxpayer to provide their personal information, the amount they owe, and the payment terms they wish to set up.
The IRS charges a fee for setting up an installment agreement, and interest and penalties will continue to accrue until the full amount is paid off. Taxpayers may also be required to provide financial information that the IRS will use to determine the monthly payment amount.
There are a few different types of installment agreements available, including:
– Guaranteed installment agreement: This type of agreement is available to taxpayers who owe $10,000 or less and can pay off the debt within three years. No financial information is required to set up this type of agreement.
– Streamlined installment agreement: This option is available to taxpayers who owe between $10,000 and $50,000 and can pay off the debt within six years. Financial information is required to set up this type of agreement.
– Non-streamlined installment agreement: Taxpayers who owe more than $50,000 or cannot pay off the debt within six years may be eligible for a non-streamlined installment agreement. Financial information is required, and the IRS may file a tax lien to secure the debt.
It`s important for taxpayers to understand that setting up an installment agreement does not eliminate their tax debt. Interest and penalties will continue to accrue until the full amount is paid off, and the IRS may take collection actions if the taxpayer fails to make payments.
If you are considering setting up an IRS Form 1040 installment agreement, it`s important to weigh the costs and benefits and ensure that you can meet the payment terms. Working with a tax professional or financial advisor can help you make an informed decision.