IRS Installment Agreement

If you can't pay your Federal taxes, you have an option of requesting an installment agreement by filing form 9465. On the form, you promise to pay a fixed amount on a certain day each month. The IRS prefers that you set up a direct debit to your bank account each month and encourage you to do so by discounting the regular one time user fee of $105 to $52 if you choose the direct debit option. Interest of 3%(current Federal rate) and late payment penalties of .5% (25% max) continue to apply until the taxes are paid. I usually encourage clients in this situation to pay as much as they can when they can to maintain more flexibility and not be tied down to a fixed payment.