The pandemic struck hard, and businesses and individuals suffered significant economic loss. The ripple effect is delayed and unpaid taxes to the Internal Revenue Service (IRS). However, through Form 433-D, the IRS provides much-needed assistance to honor tax obligations. We guide you through this form that helps those with overwhelmed tax obligations.
What Is IRS Form 433-D?
An IRS form 433-D, or installment agreement, is a form that taxpayers fill to authorize automatic direct debit as a means to resolve overdue taxes. The document finalizes the agreement between an individual or a business and the IRS. However, you need a form 9465 from the IRS to initiate the tax resolution.
Who Should File an IRS Form 433-D?
Form 433-D is generally for people who owe the IRS taxes and are in a tough financial spot. However, there are specific cadres that the IRS allows leveraging the tax resolution scheme. The following entities are permitted to apply for the form 433-D:
Self-employed individuals who don’t have their income adjusted for tax benefits. However, such individuals would require approval from the IRS through form 9465.
Additionally, individuals and businesses with tax debt up to $250,000 and cannot pay to qualify for the installment agreement. However, it would help if both parties’ current compliance and identification documents to ensure the payment address was accurate.
Who Shouldn’t File an IRS Form 433-D?
If you have delinquent taxes, you should not apply for an installment agreement on taxes. Current compliance is essential to prove you are not pyramiding. In simple speak, it means entities with old liabilities cannot pile new debt.
Also, if the payments would increase financial distress, you shouldn’t file the form in the threat of economic hardship; use form 433-A, 433-B, or 433-F. Liaise with the IRS or a tax compliance lawyer to check your eligibility for a tax installment agreement.
IRS Form 433-D vs. Form 9464
Form 9464 initiates the installment agreement for automatic debit and monthly mailed payments to the IRS, while form 433-D finalizes the installment agreement by providing relevant information for the installments. However, taxpayers cannot initiate the tax agreement if the mode of payment is mail payments monthly.
The Terms and Conditions of IRS Form 433-D
The legalese and IRS jargon usually deters many from leveraging form 433-D. However, we present the fine print of form 433-D in understandable terms.
Tip: Always read the fine print before signing any official document. IRS forms and agreements have consequences if you default on them. Read carefully while seeking legal clarification.
Agreement and Liabilities
By signing the form, you agree to pay the determined amount, both monthly installments, penalties, and interest until the statute of limitations expire. If the IRS terminates your agreement, they will issue a written notice.
The IRS requires payment before the due date. If you default, the IRS can terminate your installment contract.
If your financial condition improves or deteriorates, the IRS can revise your installments and set a new payment amount. The revision bases on a long-term contract rather than a short-up phase in your financials.
The IRS will apply any tax refund to offset the overdue tax debt. However, you must continue paying your installments until you clear the debt.
Service fees differ contingent on different factors. As of 2020, applying online or paying through money order, card or check attracts a fee of $149, while using mail attracts a $107 fee.
If you apply for the installment agreement via mail and submit payments via mail, you will pay a $225 service fee. However, you can request a service fee reduction if you fall in the low-income group.
How to Fill in the IRS Form 433-D
The process of filling form 433-D is usually a complicated one. However, we try to make it as simple as possible using the following steps.
Fill in the basic information
Capture contact details, official name(s), social security number, phone number, and current address. If you are jointly filling the form, include your spouse’s name—also, state whether you are employed and the employer’s address.
Indicate your financial institution name, contact details, and address.
Document the tax information
State the tax type, the amount you owe, tax periods, initial payment, date of payment increase or decrease, and the date you intend to start paying.
Write the automatic direct debit details
Include a void check or detail the account and routing numbers. However, if you cannot make direct debit payments, mark the box that states, “I am unable to make debit payments.”
Finalize filling the form
Proofread form 433-D to ensure you have documented the correct details. Proceed to write the initials after the tax information section and sign the form. If it’s a joint application, ensure your spouse also signs. Remember to capture the date at the bottom of the document. Mail the form.
Where to Mail Form 433-D
The IRS, a derivative of the United States Treasury, has various offices you can mail the form to. Check the address of the office depending on where you live. Ask for assistance from the IRS if you meet any hitches.
Consequences of Not Making the Payments on Time
The IRS developed Form 433-D to ease the tax burden on financially strained parties. However, the IRS does not kindly respond when you default. If you fail to make payments on time, the following might happen:
- Request a reinstatement of the form to pay a one-time cost of $50 to pause the installments.
- The IRS may reject your request and proceed with punitive measures to claim taxes.
- The IRS may place liens on assets, levy income, and assets to secure delinquent taxes.
Warning: Do not wait to see what happens if you default. If you cannot make your remittance, immediately contact the IRS. Terms and conditions delineated in the form state the consequences of not fulfilling your tax obligations.
Overdue tax resolutions are always a welcome thought. You can leverage IRS form 433-D to ease the tax burden. However, read the fine print before you sign the document. Remember to pay the agreed amount before the due date to avoid harsh IRS repercussions.
Disclaimer: This article is not legal or tax advice. It would help if you did not use this article only for educational purposes and not as an alternative for professional legal advice.