Taxpayers who can’t pay their taxes in full are often able to pay their IRS debt over time through a payment plan. But, what happens if you find yourself owing additional tax debt in the future? Can you have two IRS payment plans? Unfortunately, the answer is no. If you’re still paying on a previous payment plan, any new tax debt could jeopardize your existing agreement. There is, however, a solution for dealing with the additional tax debt and avoiding collection actions.
Amending an Existing IRS Payment Plan
Although the IRS will not allow you to have two payment plans at the same time, you should be able to amend your existing agreement to include the new tax debt. It’s important that you contact the IRS to update your payment plan if you expect to owe additional taxes. If you wait until the tax debt is assessed by the IRS, you will be considered in default on your current agreement.
To amend your existing agreement before the new taxes are assessed:
- Call 1-800-829-7650 and speak with an IRS representative about amending your current payment plan;
- Visit a local IRS tax office; or
- Submit IRS Form 9465, Installment Agreement Request.
You can either mail in Form 9465 or amend your existing payment plan online (if you owe less than $50,000). Be sure to include information regarding your original payment plan balance, as well as the expected new tax debt. It’s also important to note that there is an $89 fee for amending your existing agreement, regardless of how you apply for it. Some low-income taxpayers may qualify for a fee waiver.
When amending your payment plan, you’ll have the option to change the type of plan, the payment amount, and the payment date. If you request a monthly payment that is too low, however, the IRS may ask you to increase the amount.
The Most Common Types of Payment Plans
If you owe taxes and can’t pay, the type of payment plan you receive will depend on the amount of tax debt you owe, as well as your qualifications. In general, the IRS typically places taxpayers into one of the following types of installment agreements.
Guaranteed Installment Agreement
Also known as a short-term installment agreement, this plan is for those who owe less than $50,000 (including penalties and interest fees) and can pay off the debt in 120 days or less. Additionally, the following must also be true:
- You haven’t entered into any other payment plan within the last five years.
- You must be able to make a payment equal to at least your entire balance (including penalties and interest) divided by 30.
- All required income tax returns were filed and taxes were paid during the past five years.
Streamlined Installment Agreement
For those who owe $50,000 or less (including penalties and interest) but are unable to pay off the total in 120 days, the IRS may approve a streamlined installment agreement. To qualify, the following must be true:
- You can pay the balance within 72 months.
- Payments must be at least $25 per month or the full outstanding balance (including penalties and interest over the life of the agreement) divided by 72, whichever is greater.
Non-Streamlined Installment Agreement
If you owe more than $50,000, you may be able to negotiate with the IRS and set up a non-streamlined installment agreement. For this type of payment plan, you will be required to submit IRS Form 433-F, Collection Information Statement. Based upon the financial information on Form 433-F and your proposed payment amount, the IRS will either accept or reject your request. Additionally, the IRS will file a tax lien with this type of payment plan.
Partial Payment Installment Agreement
Taxpayers who are unable to pay their tax debt balance in 72 months may qualify for a partial payment installment agreement. Before being approved, you will need to complete Form 433-F and prove you have a financial hardship. If your request is accepted, you will also be required to update your financial information every two years. Your agreement may be revised or terminated if your financial situation changes.
What Happens If Your Payment Plan Goes Into Default?
If you fail to amend your payment plan before the IRS assesses any new tax debt and you receive a notice of intent to terminate, don’t panic. You still have time to amend your agreement. Simply follow the instructions on the letter and contact the IRS right away. Although the IRS should not take any enforced collection actions while considering your request, there may be a reinstatement fee if your previous plan goes into default. If your request for an amended agreement is rejected, you may also file an appeal. During this time, collections are also suspended.
Need help? Contact a tax professional. At Tax Defense Network, we can help you determine which installment agreement is best for you. Call 855-476-6920 for a free, no-obligation consultation today!