Are you struggling to pay off your taxes to the IRS? If so, you may have entered into an installment agreement – a monthly payment plan that allows you to pay your taxes over time. But what if a single installment agreement isn’t enough for you to clear your dues? Can you have multiple installment agreements with the IRS? In this blog post, we’ll explore this question and help you understand the options available to you if you find yourself in this situation. So, keep reading to find out more!
Two installment agreements with IRS?
Taxpayers dealing with IRS debt may wonder if they can have two installment agreements with the IRS. The answer is no, as an installment agreement is meant to consolidate all owed taxes into one payment plan. However, if a taxpayer incurs new tax debt while on an existing installment agreement, they can modify their current agreement to include the new debt. It's important to stay up-to-date on all tax returns and payments to avoid defaulting on the agreement.
Eligibility for installment agreements depends on the amount owed, and there are options for low-income taxpayers. Agreements can be made online or in person. It's important to make monthly payments and submit returns promptly to avoid defaulting.
Understanding IRS installment agreements
According to Tax Group Center Inc., "You cannot have multiple installment agreements with the IRS simultaneously." However, if a taxpayer accumulates new tax debt while already in an installment agreement, they may modify their existing agreement to include the extra debt. It's important to keep in mind that taxpayers must apply for a modified agreement that includes the new debt before the taxes are due.
Additionally, the IRS has specific requirements that must be met to qualify for an installment agreement. Taxpayers can be eligible for qualification if they owe a total of $50,000 or less for tax penalties and interest on all their returns or if they owe an amount lower than $100,000 or $25,000 for tax penalties and interest, depending on the situation.
How do IRS installment agreements work?
IRS installment agreements allow taxpayers to pay their tax debt over time without incurring additional fees and penalties. There are two types of payment plans: one lump sum payment or a monthly payment plan with an installment length longer than 180 days.
Taxpayers need to be current with their tax returns to be eligible for the program. While taxpayers cannot have two installment agreements with the IRS, they can modify an existing agreement to include new tax debt.
Not paying or filing future taxes can cancel the installment agreement for past taxes and remove protection against penalties and interests. Taxpayers should contact the IRS to reapply for a modified agreement that folds new tax debt into the existing balance. [1]
Can you add new tax debt to an existing installment agreement?
When it comes to owing back taxes and setting up an installment agreement with the IRS, it's important to understand the guidelines and limitations. One common question is whether you can add new tax debt to an existing installment agreement.
If you are struggling to settle your tax debts and meet the requirements for various installment payment alternatives, it may be possible to increase your current agreement and add more debt to it.
Act quickly to avoid defaulting on the agreement and facing collection actions before the tax deadline. Additionally, you may be charged interest and penalties on the full amount until it's resolved completely. It's best to seek guidance from a tax professional or reputable tax resolution firm to explore your options for resolving tax liabilities.
Defaulting on an IRS payment plan
Defaulting on an IRS payment plan can have serious consequences. If you're currently enrolled in an IRS installment agreement and can't afford to pay your new tax debt, you won't be allowed to hold multiple installment agreements with the IRS simultaneously. Your existing agreement will default, and you will be expected to pay both your past debt and new debt immediately. You will also lose the penalty and interest protection that the IRS installment agreement gave you.
However, there may be a way to modify your existing installment agreement to account for the new debt. Contact the IRS to modify your payment plan and include your new tax debt before the tax due date. Remember to file all tax returns owed to the IRS before making any changes to your agreement.
Amending an existing installment agreement
When with the IRS, taxpayers may find that their financial situations have changed since their initial installment agreement was set up. In such cases, it is possible to amend the existing installment agreement. The IRS website states that modifications may be made to the "repayment amount, due date, and/or monthly payment amount." Taxpayers can do this online, by phone, or by submitting Form 9465. However, it is important to note that this may result in additional fees and interest charges.
Getting assistance from a tax expert or trustworthy tax company like Jacobwise & Co Inc can help understand these changes and ensure that taxpayers use all possible choices. To fix your unpaid taxes, you might have to make a deal with the IRS.
Options for taxpayers with low income
Taxpayers with low income have several options when it comes to setting up a payment plan with the IRS. The IRS offers a short-term payment plan that allows taxpayers up to 120 days to pay their taxes in full without incurring a user fee.
Furthermore, there's a hassle-free payment plan available that provides a repayment period of up to 72 months. Even better, no financial statement is required for outstanding balances of less than $50,000.
For those who owe less, there is a payment plan that allows taxpayers up to 120 days to pay in full with no setup fee. The Low-Income Taxpayer Clinics can help those with limited income settle disputes with the IRS, and free tax assistance is available for those over 60. It's essential to file all tax returns before requesting an installment agreement and ensure all future taxes are paid on time to avoid defaulting. [4][5]
Short-term installment agreement
The Short-term Installment Agreement is one option taxpayers can consider when they cannot pay their taxes in full. Taxpayers who owe $50,000 or less and can pay their balance within four months (120 days) may be eligible for this program. Unlike other installment agreements, this option doesn't require a setup fee and won't result in a federal tax lien.
However, to qualify for this program, taxpayers must have filed all required tax returns and paid all taxes due for the past five years. Additionally, they must not already be in an installment agreement.
If you don't qualify for the Short-term Installment Agreement, you could consider the Streamlined Installment Agreement. This option is based on your ability to pay, not on the amount you owe, and could be a good choice for many taxpayers. Both options aim to help taxpayers avoid IRS collection actions, such as a federal tax lien. [6]
Streamlined installment agreement
If you owe $50,000 or less (including penalties and interest) to the IRS but cannot pay the debt in 120 days, you can consider the Lined Installment Agreement as a viable solution. This program allows taxpayers to set up an automatic payment plan without providing additional financial information.
Taxpayers can become eligible by making monthly payments of at least $25 or by paying the entire outstanding balance (which includes additional fees and interest over the life of the contract) in no more than 72 installments, whichever amount is higher. If you owe more than $50,000, you may be able to negotiate with the IRS to set up a non-streamlined installment agreement.
It is important to note that you cannot have two payment plans with the IRS at the same time. By taking action before the tax debt is assessed, it is possible to modify your current agreement and incorporate the new debt. Simply get in touch with the IRS and pay a fee of $89.
Tips for avoiding IRS collection actions
For those who are unable to pay their taxes in full, setting up a payment plan with the IRS can help avoid collection actions. There are two payment options: a short-term plan that lasts up to 180 days, and a long-term plan, called an installment agreement, for paying for more than 180 days.
It's crucial to acknowledge that the IRS won't entertain the notion of a payment plan until all tax returns have been filed, and even with a payment plan in place, penalties and interest will keep accumulating. Additionally, the IRS may still file a Notice of Federal Tax Lien even with a payment plan in place.