If you can’t pay your tax bill on time, it’s possible to apply for what is known as an “installment agreement” with the IRS. If the IRS grants the application, the agency will establish a payment plan so you can make monthly installment payments to pay off your back taxes.
Before you apply for an installment agreement, however, you should consider finding an alternative source of funds to pay off your tax bill. This will help you avoid the penalties and interest that the IRS will charge for back taxes. Depending on the terms you can get from a financial institution, or the interest rate on your credit cards, it might save you money in the long run to pay your tax bill by credit card or take out a loan to cover your debt to the IRS.
If using an installment agreement to set up a payment plan still makes the most sense for your situation, there are a few things you should know before you submit your application:
You can file an application online if your individual taxes, penalties and interest are $50,000 or less. You can also call the phone number listed on your tax bill to start the application process. Finally, you can submit a paper application using Form 9465-FS, Installment Agreement Request. If your tax bill is over $50,000, you’ll also have to fill out and submit Form 433-F, Collection Information Statement.