Hello, I’m Jill from TurboTax with some information about paying your income tax bill in monthly installments.
Have you ever finished your tax return only to discover that the refund you anticipated was actually a tax bill? If this ever happens and you are unable to pay the tax in full, you should consider requesting an installment agreement so you can make monthly tax payments.
In order to request the installment agreement, you must be unable to pay the tax in full within 120 days of the tax return filing deadline or the date you receive an IRS collection notice, and can’t currently be on an installment plan with the IRS.
The 9465 form is rather short and only requires your personal information, the name and addresses of your bank and employer, the amount of tax you owe, an estimate of the monthly payment you can afford, the day of each month you prefer your payment to be due and the amount of any payment you choose to send with the form.
If electing to make your monthly tax payments by electronic funds withdrawal, you must also provide your bank account and routing numbers. The IRS will guarantee acceptance of your installment plan request if for the previous five tax years, all of your returns were filed and all taxes were paid on time and you didn’t enter into an installment agreement. In addition, your request for the installment agreement must be out of necessity rather than preference and your current tax debt must be $10,000 or less.
As part of the guaranteed acceptance, you cannot take more than three years to pay off your taxes and you must agree to comply with all tax laws for the duration of the agreement. This means that even while you are making monthly payments, you must ensure that you file all future tax returns and pay your taxes by the deadline each year. If you don’t, the IRS can cancel your installment agreement and request full payment. One last thing you should always remember is that an installment agreement doesn’t eliminate late-payment interest and penalties —it only prevents the IRS from pursuing more severe collection procedures, such as garnishing your employment wages.
If you got a tax bill when you were expecting a refund, try our TurboTax W-4 Calculator at TurboTax.com. It can help you adjust your W-4 so more tax is withheld from your paychecks to avoid any tax time surprises.