Form 433-D Installment Agreement: A Complete Guide for 2024
When you owe the IRS but can't pay your full tax bill immediately, Form 433-D serves as your official agreement document for setting up monthly payments. Think of it as a contract between you and the IRS that lets you pay off your tax debt over time rather than all at once. This form is typically prepared by the IRS after you've requested and been approved for an installment plan, documenting the specific terms you've both agreed to follow.
What the Form Is For
Form 433-D is the official IRS Installment Agreement document that establishes the legal terms of your payment plan with the IRS. Unlike Form 9465 (which you use to request a payment plan), Form 433-D is the actual agreement document you receive after the IRS approves your installment plan. The form spells out exactly how much you'll pay each month, when payments are due, and what responsibilities you have during the agreement.
The form captures essential information including your name, Social Security Number or Employer Identification Number, the types of taxes you owe, the specific tax periods, the total amount owed, and your agreed-upon monthly payment amount and due date. It also includes your authorization for the IRS to contact third parties if needed to administer the agreement, and if you choose direct debit payments, your banking information for automatic withdrawals.
This agreement covers your outstanding federal tax liabilities including the original tax amount plus all penalties and interest that continue to accrue until you pay the balance in full. The IRS typically sends you Part 2 of Form 433-D (the taxpayer's copy) after approving your installment agreement request, while they retain Part 1 for their records.
When You’d Use Form 433-D (Late or Amended Filing Situations)
Form 433-D comes into play in several common scenarios. If you've just filed your tax return and discovered you owe more than you can pay by the April deadline, you would first request a payment plan (using Form 9465 or the online application tool), and if approved, you'd receive Form 433-D documenting your agreement terms.
For amended returns filed on Form 1040-X that create or increase a tax liability you cannot immediately pay, the same process applies—you request an installment plan, and Form 433-D formalizes the approved arrangement. The form is also used when you receive an IRS notice about unpaid taxes from prior years and need to establish a payment plan to resolve those outstanding balances.
It's worth noting that you should request a payment plan as soon as you realize you cannot pay your tax bill in full. Waiting only increases the penalties and interest that accumulate on your unpaid balance. The IRS generally will not pursue enforced collection actions like levies once you have a pending installment agreement request or an approved agreement in place, making early action in your best interest.
Key Rules and Thresholds for 2024
The 2024 version of Form 433-D reflects several important rules and fee structures that differ based on how much you owe and how you apply. For individuals owing $50,000 or less in combined tax, penalties, and interest who have filed all required returns, you can qualify for a streamlined long-term payment plan. If you owe less than $100,000, you may be eligible for a short-term payment plan (paying within 180 days or less) with no setup fee.
Setup fees changed on July 1, 2024. If you apply online and agree to Direct Debit (automatic bank withdrawals), the fee is just $22—the lowest option available. Applying online without Direct Debit costs $69, while setting up a plan by phone, mail, or in-person costs $178 for regular payment methods or $107 for Direct Debit arrangements.
Low-income taxpayers receive significant breaks. If your adjusted gross income is at or below 250% of the federal poverty guidelines, you qualify for a reduced $43 setup fee. Better yet, if you're low-income and agree to Direct Debit payments, the setup fee is completely waived. Low-income taxpayers who cannot do Direct Debit can receive a full reimbursement of the $43 fee upon completion of their installment agreement.
Your monthly payment date must be between the 1st and 28th of each month—you choose the date that works best for your budget, but it must be the same day every month. The IRS must receive your payment by that date. While your agreement is in effect, penalties and interest continue to accrue on your unpaid balance, so paying more than the minimum when possible saves money in the long run.
To maintain your agreement, you must file all future tax returns on time and pay any new taxes owed in full by their due dates. If you're self-employed or have other income not subject to withholding, you must make quarterly estimated tax payments. Your federal tax refunds will be automatically applied to your outstanding balance until it's paid in full, but you must continue making your scheduled monthly payments regardless.
Step-by-Step (High Level)
Step 1: Determine Your Eligibility and Choose Your Application Method
Review your total tax debt including penalties and interest. If you owe $50,000 or less and have filed all required returns, you can apply online at IRS.gov using the Online Payment Agreement tool. This is the fastest method and offers the lowest fees. Alternatively, you can apply by phone, mail using Form 9465, or in person. Determine whether you can commit to Direct Debit payments from your checking account, as this dramatically reduces your setup fee.
Step 2: Submit Your Payment Plan Request
Through your chosen method, provide your taxpayer identification information, specify which tax periods you need included, propose a monthly payment amount you can afford, and indicate your preferred payment due date (between the 1st and 28th). For balances under $50,000 with streamlined agreements, you generally won't need to provide detailed financial information. For larger amounts, you may need to complete Form 433-F (Collection Information Statement) showing your income, expenses, and assets.
Step 3: Wait for IRS Review and Approval
The IRS typically responds within 30 days, though it may take longer during busy filing season. During this pending period, the IRS generally will not take enforced collection actions like levying your wages or bank accounts. If approved online, you may receive immediate confirmation. For mail applications, watch for your approval letter and Form 433-D.
Step 4: Review and Sign Your Form 433-D
When you receive your Form 433-D (the official agreement document), carefully review all the terms including the payment amount, due date, and total balance. The form will specify your total amount owed as of a certain date, your monthly payment amount, and important terms of the agreement. Sign and date the form where indicated, including your spouse's signature if it's a joint liability. Keep Part 2 (taxpayer's copy) for your records and return Part 1 to the IRS at the address specified in your approval letter.
Step 5: Set Up Your Payment Method
If you selected Direct Debit, the form includes fields for your bank routing number and account number—complete these sections and attach a voided check. Your first debit will typically occur 5-8 weeks from the agreement date. If paying by other methods, set up your preferred payment system (EFTPS, Direct Pay, check by mail) and mark your calendar for monthly payments. Consider setting reminders a few days before your due date.
Step 6: Make Payments and Maintain Compliance
Make your first payment for the amount agreed upon or the setup fee, whichever is greater. Continue making all scheduled monthly payments on time. File all required tax returns by their due dates and pay any new taxes in full to avoid defaulting on your agreement. Keep records of all payments made, and remember that even when the IRS applies a tax refund to your balance, you must still make your regular monthly payment.
Common Mistakes and How to Avoid Them
Mistake 1: Failing to Stay Current with New Tax Obligations
Many taxpayers focus on their installment agreement payments but forget they must also file all future returns on time and pay new tax liabilities in full. Missing estimated tax payments or underpaying on a new year's taxes will default your agreement. Solution: If you're self-employed or have income without withholding, calculate and make quarterly estimated tax payments. Review your withholding annually and submit a new Form W-4 to your employer if needed to ensure enough tax is withheld from your wages.
Mistake 2: Missing or Making Late Monthly Payments
Life gets busy, and it's easy to forget a payment due date, but late or missed payments can trigger default and termination of your agreement. Solution: Enroll in Direct Debit (automatic bank withdrawals) to ensure payments are made on time every month. If that's not possible, use the IRS's Electronic Federal Tax Payment System (EFTPS) to schedule payments in advance—individuals can schedule up to 12 months ahead. Set calendar reminders several days before your due date as a backup.
Mistake 3: Not Updating the IRS When Financial Circumstances Change
Your installment agreement is based on your financial situation at the time of approval. If your income significantly increases, you may be required to pay more. If it decreases substantially, you might struggle with payments and risk default. Solution: If your financial situation changes significantly in either direction, contact the IRS proactively. You can request modification of your payment amount through the Online Payment Agreement tool or by calling the number on your agreement. A $10 fee applies online ($89 by phone) for revisions, but this is far better than defaulting.
Mistake 4: Choosing the Wrong Payment Method and Paying Excessive Fees
The difference between setup fees is substantial—taxpayers who apply by mail without Direct Debit pay $178, while those who apply online with Direct Debit pay just $22. Solution: Unless you absolutely cannot use online systems or bank accounts, apply online at IRS.gov/OPA and choose Direct Debit. This saves you $156 in fees. If you qualify as low-income, the Direct Debit fee is waived entirely, saving even more money that can go toward your actual tax debt.
Mistake 5: Ignoring IRS Correspondence and Annual Statements
The IRS sends important notices during your agreement, including CP 89 annual statements showing your payment activity and remaining balance, and notices if there are issues with your agreement. Some taxpayers ignore these, assuming everything is fine. Solution: Open and read every IRS letter immediately. Review your annual CP 89 statement to verify payments were properly applied and check your current balance. If something looks incorrect, contact the IRS right away using the phone number on the notice.
Mistake 6: Not Keeping Adequate Payment Records
When paying by check or money order without Direct Debit, payments can occasionally be misapplied or not credited properly. Without records, it's difficult to prove you made payments. Solution: Keep copies of all payment confirmations, canceled checks, money order receipts, or electronic payment confirmations. On checks, always write your SSN, the tax year, and "Installment Agreement" in the memo line. Keep your records for at least three years after the agreement is satisfied.
Mistake 7: Assuming Tax Refunds Replace Regular Payments
When the IRS applies your tax refund to your installment agreement balance, some taxpayers mistakenly believe they don't need to make their regular monthly payment that month. This causes the agreement to go into default. Solution: Understand that refund applications are separate from your required monthly payments. Even if a refund is applied, you must still make your scheduled payment. Your refund simply reduces the total balance faster, potentially allowing you to pay off the agreement sooner.
What Happens After You File
Activation and Monitoring
Once you return your signed Form 433-D to the IRS, your installment agreement becomes active. The IRS will input transaction codes into their system that prevent enforced collection activities like wage garnishments or bank levies as long as you remain in compliance with the agreement terms. Your account will be monitored systematically to ensure you're making timely payments and staying current with all filing and payment requirements.
Annual Statements
You'll receive an annual statement (CP 89 or CP 289) each year showing your beginning balance, all payments made during the year, penalties and interest charges added, and your ending balance. This helps you track your progress toward paying off the debt. The statement also serves as your official record from the IRS of your payment activity.
Potential Tax Liens
Depending on your balance amount, the IRS may file a Notice of Federal Tax Lien (NFTL), which becomes a public record and can affect your credit and your ability to sell property. For streamlined installment agreements under $50,000, the IRS typically won't file a lien, but they reserve the right to do so if the agreement defaults. The lien protects the government's interest in your property and assets.
Duration and Accruals
Your installment agreement will continue until one of several things happens: you pay the full balance (including all accrued penalties and interest), the collection statute expiration date arrives (generally 10 years from assessment), you default on the terms, or you negotiate a different resolution like an Offer in Compromise. Throughout the agreement term, penalties and interest continue accumulating on your unpaid balance, though if you filed timely and meet certain conditions, your failure-to-pay penalty may be reduced from 0.5% to 0.25% per month while the agreement is active.
Default and Termination
If you default by missing payments, failing to file a required return, or incurring new tax debt you don't pay, the IRS will send you a notice of intent to terminate your agreement, giving you 30 days to cure the default or request a Collection Due Process hearing. During this period, the collection statute is suspended. If the agreement is terminated and not reinstated, the IRS can resume enforced collection actions, including levying your wages and bank accounts. Reinstatement is possible but requires an $89 fee ($43 for low-income taxpayers, $10 if done online), plus you must catch up on missed payments and resolve whatever caused the default.
Benefits of Compliance
The good news is that maintaining an installment agreement demonstrates good faith to the IRS and prevents the stress and financial disruption of enforced collection. Many taxpayers successfully pay off their tax debts over time through installment agreements, especially when they use Direct Debit to ensure consistent, on-time payments.
FAQs
Can I pay off my installment agreement early without penalty?
Yes, there is no prepayment penalty for paying off your agreement early. In fact, paying extra when you can or making a lump sum payment reduces the total interest and penalties you'll pay over time.
What happens if I can't make a payment one month?
Contact the IRS immediately before you miss the payment. You may be able to temporarily modify your agreement or make arrangements. Don't simply skip the payment, as this can trigger default proceedings.
Will an installment agreement affect my credit score?
The installment agreement itself doesn't appear on credit reports, but if the IRS files a Notice of Federal Tax Lien (which they may do for larger balances or if you default), that lien becomes public record and will negatively impact your credit score.
Can I include multiple tax years in one installment agreement?
Yes, Form 433-D allows you to include multiple tax years and types of taxes in a single agreement, as long as you meet the eligibility requirements for the total combined amount owed.
How do I qualify for low-income status to get reduced fees?
You qualify if your adjusted gross income for the most recent year is at or below 250% of the federal poverty guidelines. If the IRS system doesn't automatically identify you as low-income, submit Form 13844 within 30 days of your agreement acceptance letter.
What's the difference between Form 433-D and Form 9465?
Form 9465 is the request form you submit when asking for a payment plan. Form 433-D is the actual agreement document the IRS prepares and sends you after approving your payment plan request.
Can the IRS change my installment agreement terms after it's approved?
The IRS can modify your agreement if your financial situation significantly improves and they determine you can pay more. They'll notify you in writing before making changes, and you have the right to appeal any proposed modifications.
Sources
All information in this guide comes from official IRS sources, including Form 433-D (July 2024 revision), IRS Payment Plans and Installment Agreements guidance, and IRS Internal Revenue Manual Section 5.14.1.
