Determine the Monthly Payment
Line 9 now asks for the amount that you can pay each month on this agreement. Here are the guidelines to help you determine this payment:
If the balance due is less than $10,000.00 and your monthly payments will have the balance (including penalty and interest) paid within 3 years, then the IRS will usually automatically accept your installment agreement. Of course, there are exceptions. If you have prior unfiled or late tax returns or other outstanding taxes owing, then the automatic acceptance will not apply. Additionally, if the IRS determines that you have sufficient funds to pay the taxes when they are due, then you will not automatically receive the approval for making installment payments on your tax debt.
In some cases, the IRS will call you or write to you and ask you to provide more information on your assets and your monthly income and expenses. If so, you must provide this information in order to receive the installment agreement. For most cases, though, on balances less than $10,000, requesting and receiving acceptance for an installment agreement is fairly automatic.
If the balance due is over $10,000 or your proposal of payment plan stretches further than 3 years, then you will most likely need to provide further detailed information of your available assets, and monthly income and expenses. In this case, the IRS will determine how much you are able to pay each month and how much you are able to pay with the return.
If the balance due is over $25,000, then you will be required to fill out the Form 433F and you may also consider getting the assistance of a CPA or tax attorney.
Never offer a larger monthly payment than you are actually able to pay. Once you default on an installment agreement, it becomes more difficult to negotiate with the IRS. At best your installment agreement may be automatically revoked and you will have to pay another fee to reinstate it. At worst, the IRS will start the process to levy your assets. Offer an amount that you know you will be able to pay each and every month, on time and without fail. You can always make larger payments or even pay the balance early.