It can be confusing trying to figure out if you can have two installment agreements with the IRS.
The straightforward answer is that if you have an installment agreement and owe taxes in a later year, you can renegotiate it to include the new debt.
In this post, we’ll help you figure out what an installment agreement is and how it works. We’ll also give you some pointers on applying for an IRS installment agreement and what to anticipate.
Keep reading for more information!
Can you have 2 installment agreements with the IRS?
No, When you can’t pay the taxes you owe, the IRS may accept an installment agreement with you. This enables you to pay off your debt little by little over time.
If you are taxed and cannot pay your outstanding tax bill in the following year, you can include that new balance in your existing agreement.
This is not considered a second agreement. You will be charged interest and penalties on the whole amount of your past-due balance until it is entirely settled.
Can tax debt be consolidated?
Yes, If you already have an installment agreement and anticipate owing taxes for the current year, you must act quickly to modify it.
Once the IRS issues a new tax balance, you will default on your existing agreement. You can ask for an amendment to the installment agreement by following these steps:
- Call the IRS at 1-800-829-7650
- Visit a local IRS office
- Fill out Form 9465, including the original agreement balance and the anticipated new balance.
Take one of these actions before the tax year’s due date to avoid having your existing installment agreement in default.
The IRS’s online payment agreement tool is the simplest method to modify your installment agreement. You may change the plan, payment due date, and payment amount. You may be required to change a proposed payment amount that is too low.
Can’t afford the Installment Agreement minimum payment
If you find that you cannot make the minimum monthly payment when you combine your new back taxes with the existing debt, fill out Form 433-F Collection Information Statement.
You may be eligible for an offer in compromise if you make a payment of less than the amount owing. Because you cannot pay more while still meeting your reasonable monthly living expenses, this might qualify you for an offer in compromise.
To modify an existing plan, you will be charged an $89 fee whether you apply in person, by mail, over the phone, or on the IRS website.
Low-income residents can qualify for fee reductions or waivers based on their circumstances.
IRS Installment Agreements
If you’re applying for a new installment agreement, the terms will be determined by your tax obligation and other factors.
The IRS generally issues the following types of installment agreements:
Guaranteed Installment Agreement
This option is also known as a short-term installment agreement and is accessible to taxpayers who owe less than $50,000 in interest and penalties before they are charged. The taxpayer must pay the remaining amount within four months 120 days.
To qualify, you must meet these criteria:
- filed all required tax returns and paid all taxes due for the past five years
- You should not be in an installment agreement.
- Make a payment of at least the amount of your entire balance with penalties and interest divided by 30.
This plan does not include a setup cost or result in a federal tax lien, which is disclosed to the three credit bureaus.
Streamlined Installment Agreement
What is a streamlined installment agreement? You may qualify for an automatic payment plan without providing additional financial information if you sign up for a streamlined agreement.
This program, also known as the Fresh Start program, is for individuals who owe less than $50,000 and can pay off the rest in under 72 months.
You must make a monthly payment of at least $25, whether it is the total amount owing with penalties and interest divided by 50, or the balance with penalties and interest divided by 50.
Streamlined agreement setup fee
Although there is a setup charge depending on your monthly payment method, the streamlined agreement does not result in a federal tax lien.
The fee for a Direct Debit Installment Agreement is $31 if you apply online or $107 if you apply in person, by phone, or by mail.
Taxpayers who earn less than 250 percent of the federal poverty level may apply for a reduction or exemption of these fees.
The setup fee is $149 if you apply online or $225 if you apply in person, on the phone, or through the mail if you want to use a payment method other than direct debit.
Note: For low-income taxpayers, there are several reductions or waivers.
Partial Payment Installment Agreement
If you can’t pay off your entire debt in 72 months, you may enter into a partial payment agreement.
To be eligible, you must complete Form 433-F, which asks for information about your assets, monthly income, and monthly expenditures. The IRS will analyze this data and may demand that you sell belongings to repay some of the debt.
Every two years, those who are approved for this sort of agreement must go through a financial examination. Your agreement may be altered or revoked if your financial situation improves.
Non-Streamlined Installment Agreement
Taxpayers who owe more than $50,000 may negotiate an installment plan if they qualify. If you fulfill the criteria listed on Form 433-F, you will be able to negotiate a payment plan.
This documentation is used to accept or reject your offer based on the financial data provided. You must also state a desired monthly payment amount.
With this sort of agreement, you should expect a decision within several months. You have the option to appeal if your proposal or payment amount is denied.
You can be rejected if you provide incorrect or insufficient information, if your living expenses are deemed to be wasteful by the IRS, or if you have defaulted on an IRS installment agreement in the past.
Need help with making payment arrangements with IRS
Contact the IRS or a tax professional if you cannot make monthly payments at any time. If you miss a payment, your installment agreement may be terminated. The IRS can begin the asset seizure procedure if it ends your agreement.