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Form 9465 CPA discusses IRS Installment Agreements | IRS Form 433-F, IRS Form 13844 and IRS Form 9465-FS

IRS Form 9465 CPA discusses IRS Installment Agreements

Gary Bode, CPA: think your IRS Installment Agreement through before submitting Form 9465. (910) 399-2705.

Like most creditors, the IRS allows Installment Agreements to pay off your debt through monthly payments. I’ll present a few procedural details and then offer some insight on the Installment Agreement process. Finally I’ll detail my usual advice for IRS Installment Agreements and Form 9465.

  • Use Form 9454 to request an Installment Agreement with the IRS for tax liabilities up to $25,000.
  • Use Form 9465-FS for tax liabilities between $25,000 to $50,000.
  • Use IRS Form 433-F for tax liabilities above $25,000. Form 433-F is a supplemental document attached to Form 9465. It discloses your finances to the IRS.
  • Use Form 13844 to lower the associated setup fees.

“I suggest a proactive approach on IRS Installment Agreements. Please read below for issues that should factor into this important decision.” 
– Gary Bode, CPA

Insights on the IRS Installment Agreement from a Form 9465 CPA

  • First things first. Is the IRS amount correct? For example, the IRS produces its own substitute tax returns if you don’t file them yourself. These substitute returns usually don’t factor in legitimate deductions and tax credits. Providing a correct return, or amending a previously submitted IRS tax return, often reduces the amount you owe.
  • Will the IRS accept less than what you owe as payment in full? You might qualify for an Offer in Compromise. The IRS recently relaxed the qualifications for this infamous “penny on the dollar” tax strategy.
  • The IRS is generous with timelines before the Installment Agreement. Take time to think everything through. They might not be as patient after Form 9465 is in place.
  • What about your State taxes? Every CPA has a story about clients who entered into an Installment Agreement with the IRS only to discover their cash flow couldn’t handle the State taxes when that issue arose.
  • The IRS discourages Installment Agreements. They imply finding other sources of financing is better for the taxpayer. Do you have alternative options?
  • You’re signing up for payments to a powerful creditor. While the IRS won’t break your knee caps for a missed payment, they can eventually seize your assets and garnish your wages. Be sure you understand all your obligations on Form 9465 before signing it.
  • Allow them to directly debit your checking account. This lowers your setup fees. It also allows more negotiating power later if they’ve placed a federal tax lien on you.
  • Will you be able to pay your taxes in 2013? The IRS can negate your Installment Agreement if you don’t comply to all future tax issues while Form 9465 is in effect.
  • If you need to include your 2013 IRS tax liability in the Installment Agreement, try to delay Form 9465 until you can file your next tax return.
  • Can you make your future estimated tax payments if they’re required? Again the IRS expects future compliance during an Installment Agreement.
  • Give them the lowest down payment possible. Why? Please read below. A bigger down payment reduces the monthly payment amount, and/or the length of the Installment Agreement. But that cash is gone and it doesn’t buy you any future favors if you can’t make the monthly payments.
  • Keep your monthly payments low. The IRS will allow Installment Agreements up to six years. Please read below for the best strategy. A shorter term doesn’t buy you any goodwill if you can’t make future payments.
  • Time your monthly payment to your monthly cash flow. The IRS lets you choose the day of the month.
  • Don’t send in extra amounts beyond the Installment Agreement unless you can pay it off completely.

Here’s the strategy I usually suggest

Assuming an Installment Agreement is your best route, after considering the above issues, here’s my suggestion.

  • Pay the lowest down payment possible.
  • Take as much time as possible to keep the payments low.
  • Save money on the side to pay off the IRS early. But only pay them if you can pay off the Installment Agreement in full.
  • Again a larger down payment, or extra payments don’t allow you to skip payments in the future. The IRS can still hold you to the monthly payment.

As a CPA, I try to cut your taxes by every legitimate means. But every CPA has clients who have problems paying the IRS. Even though an Installment Agreement, and Form 9465, seem like the end game, you still have cards to play. Like what you read? We have a virtual office to serve you or your company wherever you are. Don’t let distance dissuade you from calling (910) 399-2705 for a free phone consult.

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