In 2011, the IRS Fresh Start program created a bridge to debt forgiveness for delinquent taxpayers that continues to help countless Americans settle federal tax debts today. The program is expansive, fairly easy to enroll in, and designed to minimize penalties. While the IRS offers a range of debt relief options that include Offer in Compromise (OIC) and Currently Non-Collectible (CNC), the most widely used option is the IRS Installment Agreement (IA).
While an IA doesn’t forgive your debt, it does allow you to pay it over time without incurring fees and penalties. It’s also the easiest option to qualify for within the IRS debt forgiveness program. Taxpayers who apply for the program are able to set up payment plans with the IRS that can last up to six years (72 months).
If you’re already enrolled in a payment plan with the IRS for an existing tax bill, you may be wondering what your next step should be if you can’t pay this year’s tax bill. Can you have 2 installment agreements with the IRS? Take a look at the steps to change IRS payment plan terms.
Can You Have 2 Installment Agreements With the IRS?
No, you can’t have multiple installment agreements with the IRS simultaneously. That doesn’t mean you’re out of luck if you have new tax debt. What’s more, there may be a way to figure out how to change IRS payment plan terms, resulting in you owing less than you did with your existing IRS agreement. But first, you have to understand the IRS’s policy on handling new debt when you already have a payment plan.
If you’re already enrolled in an Installment Agreement with the IRS, you may remember that you agreed to some lengthy terms when you were approved for the program. One of those terms was that you promised to stay current with all future tax payments. If you fail to pay or file future taxes, your IRS Installment Agreement for past taxes defaults. That means the IRS will expect you to pay both your past debt and your new debt immediately. You’ll also lose the penalty and interest protection that the IRS Installment Agreement gave you.
If you have a new tax debt when you’re already enrolled in an Installment Agreement, do not just avoid paying your taxes! The IRS won’t technically allow you to apply for a new Installment Agreement, but you can learn how to change IRS payment plan terms to account for the new debt.
Keep in mind that you’ll need to check if you still qualify for an IRS Installment Agreement with your new debt figured into the equation. The requirements are:
- Long-Term Individual Payment Plan: You owe $50,000 or less in combined tax, penalties, and interest with all of your returns filed.
- Short-Term Individual Payment Plan: You owe less than $100,000 in combined tax, penalties, and interest with all of your returns filed.
- Long-Term Business Payment Plan: You owe $25,000 or less in combined tax, penalties, and interest with all of your returns filed.
It’s crucial to contact the IRS to reapply for a modified agreement that folds your new tax debt into the balance of your payment plan. You need to do this before your taxes are due. If your balance is too large to handle in monthly payments, you may actually be able to switch to a new type of loan forgiveness option based on your updated debt total. Just remember that nothing can be done until you file all tax returns that are owed to the IRS.
How to Modify an IRS Installment Agreement
Act quickly, because your existing agreement with the IRS will be in default as soon as the IRS assesses your new tax balance. If you’re unsure about what to do, have a tax professional contact the IRS on your behalf to request a modification. If you disagree with the debt balance that the IRS has provided, you can also submit Form 9423: Collection Appeal Request to contest your tax bill.
If you agree with the tax bill, you can request to have the new balance added to your existing Installment Agreement. While the IRS won’t allow you to have two separate Installment Agreements, you can consolidate your tax debt into a single payment plan fairly easily.
The process is the same for both individual and business IRS Installment Agreements. If you’ve already allowed your current agreement to lapse by default, you may be required to pay a reinstatement fee. There’s also a chance that you may not be able to make your new monthly payment amount based on your monthly income once all of the numbers are plugged in. This might make you eligible to move from an Installment Agreement to another IRS forgiveness option.
If your new total is unpayable based on your monthly income, you can fill out IRS Form 433-F: Collection Information Statement. This is the form that the IRS uses to determine if delinquent taxpayers are eligible for Offer in Compromise or Currently Non-Collectible status. If you are eligible, you may be able to negotiate your tax debt down to a lower figure.
You Don’t Have to Learn How to Modify an IRS Installment Agreement Alone
If you know a tax bill that you can’t pay is coming, don’t wait until your current IRS payment plan goes into default. At Tax Group Center, we help taxpayers modify their Installment Agreements to continue taking advantage of the IRS Fresh Start program. Contact us today to work with a team of lawyers and CPAs with 30 years of experience to find out how to change IRS installment agreement terms!