With the tax deadline just around the corner, what happens if you owe Uncle Sam and can’t pay the bill? Fortunately, in recent years, the IRS has made it easier to pay delinquent taxes in monthly installments.

To do this you complete IRS Form 9465, Installment Agreement Request, and attach it to your return. You may file electronically. But in any event you have to supply information such as the name of your bank and the amount and date of the proposed monthly payment. You will not need a financial statement for amounts under $10,000. If the IRS approves the request, there will be a $105 fee, reduced to $52 for taxpayers directly debiting payments from their bank accounts and $43 for low income taxpayers. The decision usually comes within thirty days.

The IRS is required to enter into an installment payment agreement if the tax liability is no greater than $10,000. The only requirements to take advantage of this “automatic” right to an installment agreement are that (1) over the previous five tax years you have not failed to file a tax return, pay income tax, or have already entered into another installment agreement, and (2) the IRS determines that you are unable to pay the liability in full when due.

Under a streamlined approval process, the IRS will grant installments to taxpayers who agree to pay a balance due of $25,000 or less within a five-year period. Under the streamlined process, no financial analysis by the IRS is required. The agreements do not require the collection manager’s approval or the filing of liens. Taxpayers may be granted a streamlined agreement even if they are able to fully pay their accounts.

When you enter into an installment agreement you must agree to make the monthly payments on time. You also must agree to meet all future tax liabilities. As a result you should arrange for your withholding from salary or wages and payments of estimated tax to be sufficient to ensure that taxes will be paid in full when a future year return is timely filed.

The IRS can terminate an agreement if you don’t timely pay an installment (and for other reasons). But it will give you 30 days to respond to its intention to terminate and an agreement that is terminated can be reinstated. There is a $45 fee for restructuring or reinstating an installment agreement.

It’s important to be aware that even if an installment payment request is granted by the IRS, interest and a reduced late payment penalty of .25 percent per month applies to any balance due. Therefore, to minimize interest and penalty charges, you should timely file the return and pay as much tax as possible with the return before making an installment payment request.

Once you take into account these interest and penalty charges, you may find that it would be less expensive to finance repayment of your tax liability some other way. Currently the IRS’ interest rate on most underpayments is 8percent. This rate is redetermined on a quarterly basis and is applied to the outstanding balance until the obligation is paid in full.

Chuck Caldwell is a Certified Public Accountant and Partner at the firm of Silas Simmons, LLP, in Natchez.