When you owe back taxes to the IRS, and they are threatening various types of collection action against you, it is important to take steps to delay such collection action in order to buy yourself time to figure out how to address the back taxes.
Using IRS Form 9465, a written letter, or even a telephone request, any taxpayer may apply for an Installment Agreement. Your request needs to include how much you will pay per month, when payments will be made, and the amount of each payment. You should also include the tax periods and types that are covered by your request.
What does such a request get for you? Once an application for a payment plan is made, you enter the magical world of "pending status". When an Installment Agreement request is pending investigation and approval or rejection by the IRS, collection activity stops. This mean no levies, no wage garnishments...in other words, you get breathing room.
During the course of investigation of your Installment Agreement request, you will most likely be required to complete a Collection Information Statement (Form 433-A, B, or F). This financial statement should be viewed as a loan application, because that's essentially what it is. You will be required to provide information about your income, assets, and expenses, and provide documentation for just about everything.
Do keep in mind that during the duration of a payment plan, the IRS will maintain a tax lien against you or your business. Also, you cannot be placed into pending status if there are unfiled returns that you need to complete. Also, if the amount of your requested payment is considered unreasonable by the individual reviewing the request, it will also very likely be rejected from the onset rather than placed in pending status.
Even if you are ultimately unable to follow through with the proposed Installment Agreement, getting into pending status can give you valuable time to find other funds to pay off the tax liability, such as through a loan or incoming accounts receivable, or to find another resolution alternative.
