info@ltg.tax
800-328-8289

Quick Answer About Installment Agreements

The IRS does not typically allow taxpayers to have two simultaneous installment agreements. If you owe new tax debt while already on a payment plan, you cannot set up a separate second agreement. Instead, you must consolidate all your tax debts into one installment agreement. For complex situations or uncertainty, consulting a tax professional is highly recommended.

This guide helps individual taxpayers who already have an IRS payment plan and face new tax debt or anyone curious about having multiple IRS payment plans.

Understanding your options can help you avoid additional interest and penalties, and prevent IRS enforcement actions.

Overview of IRS Payment Plan Options

  • Payment plans are generally available when the total tax liability is under $50,000, including interest and penalties.
  • Short-term payment plans allow payment within 180 days.
  • Long-term payment plans extend beyond 180 days, up to 120 months.
  • Partial payment agreements and guaranteed installment agreements are available depending on debt size.
  • Direct debit payments are preferred to reduce setup fees and ensure timely payments.

How IRS Installment Agreements Work

  • Installment agreements reduce immediate collection risks such as levies or wage garnishments.
  • Interest and penalties continue to accrue until the balance is paid in full.
  • Direct debit payments help avoid missed payments and lower user fees.
  • Taxpayers must be current on all income tax returns to qualify.

Short-Term Payment Plans

  • Available for taxpayers who can pay their balance within 180 days.
  • No setup fee if paid within the short-term plan period.
  • Best for those who can quickly pay off their debt.

Long-Term Payment Plans

  • Streamlined installment agreements cover balances up to $50,000.
  • Payments can extend up to 120 months.
  • Direct debit is often required to lower fees and avoid defaults.
  • Taxpayers must file all required income tax returns to be eligible.

Can You Have Two Installment Agreements or Payment Plans?

  • The IRS prohibits having two active installment agreements simultaneously.
  • New tax debts must be added to your existing installment agreement by amending it.
  • You can modify your agreement online for debts under $50,000, usually for a $10 fee.
  • Request amendments before the new tax debt becomes due to avoid default.

Rolling New Tax Debt Into Your Existing Agreement

  • Contact the IRS to update your installment agreement terms.
  • Submit Form 9465 to amend your payment plan.
  • Adding new debt typically increases your monthly payment.
  • Assess your ability to pay the adjusted amount before requesting changes.

What If You Owe Taxes Again Next Year?

  • Always file income tax returns on time, even if you cannot pay in full.
  • Accumulating new tax debt while on a payment plan can cause default and IRS collection notices like Notice CP523.
  • Adjust your W-4 withholdings or make estimated tax payments to avoid future tax debt.

Consequences of Defaulting on an Installment Agreement

  • Default can lead to IRS collection actions such as liens, levies, and wage garnishments.
  • Interest and penalties continue to accrue during default.
  • Contact the IRS immediately if you miss a payment to request reinstatement or alternative relief.

Alternatives to Installment Agreements

  • Offer in Compromise allows settling your tax debt for less than the full amount.
  • Currently Not Collectible status temporarily halts collection actions for hardship cases.
  • Partial Payment Installment Agreements may allow smaller payments if you prove financial hardship.

How to Apply and Manage an Installment Agreement

  • Use the IRS Online Payment Agreement tool to apply or modify your plan.
  • File Form 9465 to request an installment agreement by mail if needed.
  • Ensure all income tax returns are filed before applying.
  • Contact your local IRS office for assistance if online options are unsuitable.

Online Tools and Making Payments

  • Set up an IRS Online Account to view your tax balances and payment history.
  • Use Direct Pay for one-time payments or enroll in direct debit for recurring installment payments.
  • Payment methods affect setup fees; direct debit payments generally reduce fees.

Fees, Interest, and Reducing Costs

  • Setup fees vary by payment method and application type; low-income taxpayers may qualify for fee waivers.
  • Interest and penalties accrue until the full balance is paid.
  • Making lump sum payments reduces the total cost by lowering accrued interest.

When to Involve Tax Professionals

  • If you’re searching for multiple payment plans with the IRS, remember that having two separate plans is not allowed. However, Lexington Tax Group can help you explore better options tailored to your financial situation that may save you money on penalties and interest.
  • Experienced enrolled agents and tax attorneys at Lexington Tax Group negotiate with the IRS to consolidate your tax debts into one manageable plan or pursue alternatives like Offers in Compromise or Partial Payment Installment Agreements.
  • Contact Lexington Tax Group at 800-328-8289 to learn how you can reduce your tax penalties and interest and avoid costly IRS enforcement actions.
  • Schedule a free consultation at https://lexingtontaxgroup.com/schedule-a-call/ to get personalized advice and start saving money today.

Planning to Avoid Future Tax Debt

  • Adjust your W-4 withholdings if you are employed to better match tax liability.
  • Make quarterly estimated tax payments if self-employed or have other income sources.
  • Maintain a tax emergency savings buffer to prepare for unexpected tax bills.
  • For expert guidance on managing your tax account and payment arrangements, call Lexington Tax Group at 800-328-8289 or visit https://lexingtontaxgroup.com/schedule-a-call/ today.