Unable to pay? Installment agreements are viable options.

• Author: Ely, Mark H.

Installment agreements may be viable options for taxpayers who find they cannot pay their tax liabilities, and recent developments should make them more accessible.

Sec. 6159 and Internal Revenue Manual Section 5331.1 authorize and direct the IRS to enter into written installment payment agreements with any taxpayer if the Service believes that such an agreement will facilitate the collection of a taxpayer's liability. To encourage taxpayer compliance through the use of installment agreements, the IRS recently streamlined its installment payment plan process and expanded its authority for granting installment agreements to different IRS functions.

In IR-93-25, the Service announced its adoption of a streamlined monthly payment plan process. Taxpayers who cannot pay their tax bill in full will now be able to request payment agreements when they file their returns. This is a significant policy change; in the past, taxpayers could not request payment agreements until they had filed and received bills from the IRS. Taxpayers who cannot pay in full and desire an installment agreement have been instructed to attach new Form 9465, Installment Agreement Request, to the top of their returns. Form 9465 is available by calling the Service toll-free at 1-800-TAX-FORM. The IRS has stated that it will respond to such a request within 30 days.

Taxpayers who do enter into installment payment plans will still be liable for interest (currently 7%) and possibly late payment penalties (0.5% per month on any unpaid amount) unless...