If you owe more money to the IRS than you can pay in a lump sum, an IRS Fresh Start Program payment plan or installment agreement (long-term payment plan) helps you settle tax debt and avoid aggressive tax collection efforts such as federal tax liens and wage garnishments.
IRS payment plans are income-based, with the idea being to pay the most you can afford monthly but not more than that. These IRS monthly payment plans have helped many taxpayers resolve tax debt and get on with their lives.
But what happens when you’re on an IRS payment plan and you incur an additional tax debt that you can’t pay all at once? Can you set up a second IRS payment plan for the new tax debt? The answer is no. Don’t fret, though. There are still ways to take care of the additional tax debt without being slapped with a federal tax lien or having your paychecks garnished.
The most common solution is to amend your current IRS payment plan.
Can You Amend an IRS Payment Plan When You Owe More Taxes?
Instead of setting up a second IRS payment plan when you owe more taxes, you can update your current IRS payment plan to include the new taxes. In other words, you can roll the new tax debt into your existing IRS payment plan. There is a fee of $89 (at the time of this writing) to make any changes to an IRS payment plan in person, by phone or by mail — whether it involves adding new taxes or not. If money is tight, you might qualify for a hardship waiver, in which case you can amend your IRS payment plan with no fee.
You can also cut the IRS payment plan change fee down to $10 (at the time of this writing) by doing the process online. Note that the online option exists only for taxpayers whose total outstanding tax balance is less than $50,000.
To roll new tax debt into an existing IRS payment plan, you may:
- Visit a local IRS office. This resource on the official IRS website will help you locate the office nearest you: https://apps.irs.gov/app/officeLocator/.
- Contact the IRS: Learn how to best get a hold of someone at the IRS.
- Complete Form 9465, the Installment Agreement Request. On this form you will fill out information about both your old tax debt currently being paid in installments and the new tax debt you seek to roll into your existing IRS payment plan. We can help with this at Wiztax!
What Are the Benefits of Amending an IRS Payment Plan to Consolidate Taxes?
Consolidating your outstanding tax debts into a single repayment agreement offers a substantial advantage over having two payment plans, and that is the ability to adjust the terms of the IRS payment plan to keep the payment at an acceptable level. If adding the new tax debt to your existing IRS payment plan makes the monthly payment burdensome or unfeasible, you can petition the IRS to extend the repayment terms instead of increasing the monthly IRS payment plan amount.
Note that there is no guarantee the IRS will approve your request, but if you can show with income documentation that a higher monthly payment is untenable, it is likely that they will.
Will Your IRS Payment Plan Default If You Don’t Amend It When You Owe More taxes?
It is important to request an IRS payment play amendment before the due date of your current outstanding taxes, as leaving them unpaid beyond that date without a repayment agreement in place will lead to interest, penalties, and possible collection activity, up to and including wage garnishment and federal tax liens. Also, if you don’t amend your IRS payment plan before the IRS assesses the new tax, you risk the IRS considering you in default of the existing IRS payment plan.
What If You Can’t Pay Your Monthly IRS Payment Plan Amount After Your New Tax Debt Is Added?
If your new tax debt is substantial enough, it might affect your ability to make monthly IRS installment payments even if the IRS agrees to extend your repayment terms as far as they can.
In this situation, you can submit an Offer in Compromise. If the IRS accepts your offer, you can settle your tax debt for less than what you owe, meaning once you pay off the reduced tax amount, the IRS will consider your taxes paid, even if your original outstanding tax balance was higher than what you repaid. Helping with the filing of an Offer in Compromise is what we do at Wiztax every day. Schedule a free call with us to learn more. You can also call us at 866-568-4593.
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