When taxpayers find themselves facing financial hardship and cannot reasonably afford to pay what they owe in taxes, applying for IRS tax relief, such as an installment agreement, can help them resolve their tax problem. IRS Form 433-D is one of the tax forms that allows the IRS to determine the taxpayer’s eligibility for an installment agreement.
TABLE OF CONTENTS
- IRS Form 433-D is a document that allows taxpayers to finalize an approved installment agreement and set up direct debit payments to pay back their tax debt owed to the IRS.
- The taxpayers who must file IRS Form 433-D to set up automatic monthly payments from their bank account include individual taxpayers, individual wage earners, business owners, self-employed individuals, and out-of-business sole proprietors.
- IRS form 433-D and form 9465 are both used by taxpayers to set up installment agreements with the IRS as a form of tax relief to help them pay their tax liability due, but while IRS Form 433-D allows taxpayers to set up payment plans by listing their bank account information to make monthly direct deposits, the taxpayer must use IRS Form 9465 to set up an installment agreement with the intention of mailing monthly payments in the form of a check to the Department of Treasury.
- If taxpayers fail to make the monthly payments they agreed upon with IRS Form 433-D, the IRS may temporarily pause the installment agreement until it is reinstated with a $50 fee. Alternatively, the IRS could cancel the 433-D Installment Agreement and seek other collection methods, such as wage garnishments, liens, and levies.
What Is IRS Form 433 D?
IRS Form 433-D is a document that allows taxpayers to finalize an approved installment agreement and set up direct debit payments to pay back their tax debt owed to the IRS. An installment agreement is a form of tax relief in which the IRS allows the taxpayer to submit monthly payments toward their tax debt instead of paying it all at once when they file their federal income tax return.
Within this form, the individual will provide a full disclosure about their financial situation and list the highest amount they could reasonably afford to pay each month. Additionally, this form allows taxpayers to share their bank account information so they can set up a monthly payment system through electronic withdrawal.
Who Must File IRS Form 433-D?
Taxpayers who owe federal income tax and wish to set up automatic monthly payments from their bank account may be required to file IRS Form 433-D. Although there are multiple tax forms that allow taxpayers to request tax relief, the taxpayers who must file IRS Form 433-D as an installment agreement request include:
- Individual Taxpayers
- Individual Wage Earners
- Business Owners
- Self-Employed Individuals
- Out-Of-Business Sole Proprioters
Who Does Not Need To File IRS Form 433-D?
There are many types of IRS tax forms that allow the IRS to determine if a taxpayer who owes back taxes will qualify for tax relief through an Offer in Compromise (OIC), Installment Agreement, Partial Payment, or Financial Hardship, and as IRS Form 433-D involves setting up direct debit installment agreements, not all taxpayers will need to file this form. Here are some instances in which IRS Form 433-D is not the most appropriate IRS tax form to request tax relief:
- The taxpaying individual owns a business and has unpaid delinquent employment taxes
- The taxpayer would face significant financial hardship by taking on monthly payments. In this case, using Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, 433-B, Collection Information Statement for Businesses, or 433-F, Collection Information Statement, may be more appropriate for their taxpayer status.
- The taxpayer wants to utilize a payroll deduction instead of direct debit to make monthly payments toward their unpaid back taxes. IRS Form 2159 would be the best form to leverage in this situation.
Instructions For Filing Form 433-D
1. Fill out and submit Form 9465.
IRS Form 9465 is used to request an installment agreement initially, so this form must be sent to the IRS before taxpayers can set up direct deposit payments. Once this form is submitted and approved, the taxpayer can set up direct deposit using tax form 433-D.
2. Download the form.
The taxpayer must download a copy of IRS Form 433-D from the IRS website to initiate the payment plan process using direct deposit.
3. Fill out the form.
The following details must be included in Form 433-D:
- The taxpayer’s name
- The spouse’s name if they file jointly
- Current mailing address
- Social Security number (SSN) or employer tax identification number (EIN) used to file
- All relevant phone numbers, including cell phones, home phones, and work phones
- The type of tax the individual is requesting an installment agreement for
- The period the tax balance is from
- The amount of the tax debt
- The amount the taxpayer agrees to submit alongside this form as their first payment
- The amount the taxpayer can afford and agrees to pay each month
- The day of the month the payment will be submitted each month
- If the taxpayer expects the payment amount to increase or decrease, a section informs the IRS how much these payments will change and the monthly payment amount following the change.
- If the taxpayer wants to submit tax payments using direct debit, there is a section for them to input their bank account information, such as the bank’s name, address, and the taxpayer’s checking account and routing numbers.
4. Mail the completed tax form to the IRS with the appropriate payment.
Once the taxpayer has completed the tax form 433-D with all of the relevant information and payments, they can mail the form to the IRS. To find the appropriate IRS address to send the tax form, taxpayers must refer to the IRS letter they received explaining their tax debts and their options for payment resolution.
If the taxpayer included their bank account and routing number to set up direct deposit payments for their installment agreement, all they need to do is submit the form.
What Is The Difference Between IRS Forms 433-D and 9465?
IRS form 433-D and form 9465 are both used by taxpayers to set up installment agreements with the IRS as a form of tax relief to help them pay their tax liability due. IRS Form 433-D allows taxpayers to set up payment plans by listing their bank account information to make monthly direct deposits. If the taxpayer wants to set up an installment agreement but wishes to send in payments as the form of a monthly check to the Department of Treasury, they must use IRS Form 9465 to set up an installment agreement.
What Happens If You Miss Your Monthly Payment?
An installment agreement allows taxpayers to make affordable payments towards their unpaid tax liabilities, but if they find themselves unable to pay for a month or more, there can be serious consequences for the IRS. It is important that taxpayers contact the IRS about their circumstances to learn how to move forward with the tax situation.
If a taxpayer expects to miss a payment only one time and they contact the IRS, the IRS may pause the installment agreement withdrawals from your bank accounts but then charge a one-time reinstatement fee of $50 to resume the payments the following month.
While pausing an installment agreement is a helpful outcome, the IRS could choose to terminate the taxpayer’s 433-D Installment Agreement and pursue a different collection route, such as:
- Wage Garnishments: The IRS can collect money owed to them through a wage garnishment by contacting the taxpayer’s employer and asking them to withhold funds from their wages each month to be paid directly to the IRS.
- Tax Liens: The IRS may issue a Notice of Federal Tax Lien against an individual or business’s assets, including real estate, personal property, and financial assets, as a result of unpaid tax debts.
- Tax Levy: Tax levies are legal seizures of an individual’s property or assets by the IRS as a means of collecting unpaid taxes.
For assistance with understanding which tax documents you need to file with your tax returns, contact the tax professionals at Ideal Tax today.