IRS Payment Plan for Self-Employed Taxpayers Checklist Checklist

• You file Schedule C, Schedule F, or Form 1040-ES
• You owe employment tax liabilities that can be included in installment agreements

Special considerations apply if

• You are in bankruptcy or have filed for bankruptcy protection
• The IRS has already levied your bank account or begun wage garnishment (you can still

request installment agreements, and entering into an agreement may result in levy release)

Key Factors the IRS Evaluates

Streamlined installment agreements for balances up to $50,000, or $100,000 with Direct Debit, are approved based on balance amount, filing compliance, and basic eligibility criteria. The IRS does not require detailed financial disclosure or evaluation of current-year estimated tax payment history for streamlined agreements. Full financial disclosure agreements may involve a more comprehensive compliance review.

The IRS requires taxpayers to be in filing compliance before approving an installment agreement. All required tax returns must be filed before the IRS will process an installment agreement request. Once returns are filed and liabilities assessed, you can apply for an installment agreement to address the assessed liabilities.

Critical compliance requirements

• The IRS requires taxpayers in installment agreements to remain current on all filing and

payment requirements during the agreement term

• Failure to file returns or pay current liabilities may result in default
• Past missed quarterly payments are not an automatic rejection criterion for establishing

a streamlined installment agreement

Required Actions

1. Gather your last two years of completed tax returns. Make sure all required tax returns are filed before applying for an installment agreement.

2. Pull three to six months of recent bank statements for documentation purposes. The IRS may request financial information, depending on your balance and the type of agreement you have.

3. Calculate your net profit from your most recent tax year. For full financial disclosure agreements, the IRS bases payment capacity on the ability to pay, as shown through the required financial statements.

4. Document your current financial situation if applying for an agreement requiring financial disclosure. List all business expenses and income sources accurately.

5. Determine a realistic monthly payment amount you can sustain. The total amount of interest and penalties depends on the balance, payment timing, and applicable rates, which vary.

6. Apply using Form 9465 or the IRS Online Payment Agreement tool, or call the IRS at

1-800-829-1040. Taxpayers applying online receive immediate confirmation and an agreement number if their application is approved. Taxpayers applying by mail receive written confirmation by mail, typically within 30 days.

7. Retain confirmation information from your application. Taxpayers applying by phone receive a reference number during the call.

8. Respond by the stated deadline if the IRS requests additional information. The IRS provides specific response deadlines in written requests for information, which typically range from 10 to 30 days. Failure to respond may result in the denial of the installment agreement request.

9. Confirm the monthly payment amount, start date, and agreement terms in writing once the approval is received. Written confirmation prevents disputes later.

10. File your current-year tax return on time and make the first monthly payment by the agreed date. The IRS may terminate an installment agreement if you fail to file a required return, fail to pay a required tax liability, or fail to pay an installment when due.

11. Set up automatic monthly payment via IRS Direct Pay, the Electronic Federal Tax

Payment System, or your bank’s bill pay. Direct Debit is required for streamlined installment agreements with balances between $25,000 and $50,000. Direct Debit is strongly encouraged for all installment agreements to ensure timely payment and reduce user fees.

12. Track all payments and keep confirmation receipts. Proper documentation provides proof of payment in the event of disputes.

Common Errors to Avoid

• Submitting incomplete documentation for agreements that require financial disclosure

can cause delays. The IRS may request additional information to process your application.

• Failing to remain current with filing and payment requirements during the term of the

agreement creates default risk. The IRS is required to provide written notice of intent to terminate at least 30 days prior to termination under federal law. You have appeal rights before collection resumes.

• Making manual payments instead of setting up automatic withdrawal increases the risk

of late or missed payments. Automatic payment creates a clear payment record and reduces processing delays.

• Not responding to IRS requests for information by the stated deadline may result in the

denial of your request. Contact the IRS if you need additional time to respond.

• Assuming the IRS has different processes for self-employed taxpayers versus

employees is incorrect. The same forms and basic procedures apply regardless of income source.

• Believing that existing levies or employment tax liabilities make you ineligible for

installment agreements is incorrect. The IRS may levy any bank accounts, wages, or assets to collect unpaid tax liabilities. You can request installment agreements even after a levy or wage garnishment has begun. Under federal law, the IRS may release a levy when an installment agreement is established. Employment tax liabilities can be included in installment agreements using Form 9465.

Consequences of Inaction

The IRS sends multiple collection notices before levy action. After issuing a Final Notice of

Intent to Levy, the IRS must wait at least 30 days before issuing a levy. The total time from the first balance-due notice to levy action varies by case and depends on multiple factors, including the response to the notice and taxpayer communication.

The IRS may levy any accounts or assets it identifies as belonging to you. Levy targets depend on available information and collection circumstances. Once a levy occurs, your business operations may be affected until the levy is resolved through payment, appeal, or installment agreement.

When to Seek Professional Help

Professional assistance is helpful when your balance exceeds the streamlined thresholds and requires full financial disclosure. A tax professional can prepare Form 433-F or Form 433-A/B and supporting documentation to demonstrate your ability to pay.

You should seek help if the IRS has sent a notice of intent to levy or issued a levy. Professional representation can help negotiate an installment agreement and request a levy release.

Professional guidance becomes particularly important if you owe multiple types of debt that require coordination. A tax professional can structure a plan that addresses all liabilities and ensures proper application of payments.

Consider professional help if a previous payment plan was terminated and you need to reapply.

A professional can identify the cause of the termination and prepare a stronger application with proper documentation.

Representation becomes critical when negotiating payment terms for balances that require financial disclosure. Professionals understand IRS financial standards and can present your financial situation effectively to support your proposed payment amount.

Need Help With IRS Issues?

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