How Many IRS Payment Plans Can You Have at Once?

Having tax debt can be stressful, especially if you can’t afford to pay the full amount right away. The good news is that the IRS offers payment plans, also known as installment agreements, for taxpayers who need more time to pay. But can you have more than one IRS payment plan at the same time? Unfortunately, the answer is no.

The IRS only allows taxpayers to have one active installment agreement at a time This agreement should include all outstanding tax years with unpaid balances, Trying to open a second payment plan for additional tax debt will cause issues, Here’s what you need to know about IRS payment plans and how to handle owing new tax balances while on an existing agreement

An Overview of IRS Payment Plans

The IRS offers payment plans to give taxpayers an alternative to paying their full tax bill in one lump sum. Payment plans allow you to make smaller payments over several months or even years until your balance is paid off. There are a few different types of IRS payment plans:

• Short-term payment plan – For balances under $10,000, pay off in 120 days or less
• Guaranteed installment agreement – For under $10,000, pay off in 180 days or less
• Streamlined installment agreement – For under $50,000, pay off in 72 months or less
• Non-streamlined installment agreement – For over $50,000, pay off terms negotiated with IRS

The amount you owe, as well as your financial situation, determines which payment plan you may qualify for. The short-term plans are easiest to get approved for. Longer-term installment agreements for larger balances may require submitting financial information to the IRS for review.

Why the IRS Only Allows One Payment Plan

According to the IRS, taxpayers may only have one installment agreement active at a time for all outstanding tax years with unpaid balances. This rule exists for a couple of key reasons:

• It keeps payment plans simple to set up and manage
• It prevents taxpayers from having multiple small payment plans with different terms
• It ensures all tax debt is handled through one agreement
• It allows the IRS to easily track repayment progress

By limiting taxpayers to one payment plan, the IRS reduces administrative costs and keeps taxpayers accountable

What Happens If You Owe New Taxes While on a Payment Plan

Many taxpayers end up owing taxes again while still paying off a balance through an installment agreement Unfortunately, having a new tax bill will automatically default your current payment plan with the IRS. Here are your options

• Amend your existing payment plan – Contact the IRS to amend your current installment agreement to include the new tax debt before it’s assessed. This prevents your plan from defaulting.

• Reinstate your payment plan – If your agreement defaults because of additional tax debt, immediately contact the IRS to re-instate your payment plan and add the new balance. A reinstatement fee will apply.

• Appeal a rejected amended payment plan request – If the IRS rejects your request to amend your installment agreement, you can file an appeal to suspend collections while it’s reviewed.

Having a new tax debt doesn’t necessarily mean you have to start over. But it’s crucial to contact the IRS proactively to add money you owe to your current payment plan. Otherwise, you risk getting stuck in a cycle of defaults.

Steps for Amending an IRS Installment Agreement

If you already have a payment plan but expect to owe taxes again soon, take action to amend your existing agreement. Here are some steps to follow:

• Review your payment plan terms – Understand your current repayment terms, balance, and monthly payment amount before amending.

• Determine your expected new tax debt – Estimate what you expect to owe for any additional tax years.

• Contact the IRS – Call, visit an IRS office, or submit Form 9465 to request amending your installment agreement.

• Provide details on both balances – Give the IRS your current agreement balance and expected new total balance when amending.

• Make payment adjustments if needed – The IRS may ask you to increase monthly payments if the new total balance requires it.

• Pay amendment fee – A $10 fee applies to amend an existing payment plan, unless you qualify for low-income relief.

• Monitor your account – Check your online IRS account to ensure new balances are added once assessed.

With some proactivity, you can add new tax debt to your payment plan and avoid defaulting on your agreement.

Options Beyond Amending Your Existing IRS Payment Plan

Amending your agreement to include new tax debt is usually the best option if you already have an IRS payment plan. But alternatives exist if amending won’t work for your situation:

• Request an extension to pay – If you owe a new tax bill but can pay it within 120 days, the IRS may approve a short extension without requiring an amended installment agreement.

• Apply for penalty relief – If failure to pay penalties are adding to your tax bill, you may request First Time Penalty Abatement or reasonable cause penalty relief to reduce what you owe.

• Submit an offer in compromise – If you can’t pay your total tax debt in a reasonable time frame, you may qualify to settle for less than you owe.

• Request currently not collectible status – Those facing financial hardship can apply to have their accounts placed on hold from IRS collections temporarily.

• File bankruptcy – As a last resort, filing Chapter 7 or Chapter 13 bankruptcy can stop IRS collections and may discharge some tax debt after completion.

Don’t panic if you are worried about how new taxes will impact your current payment plan. The IRS provides options to handle additional balances in many situations. Reach out for professional assistance if you need help navigating this process.

Other Key Things to Know About IRS Installment Agreements

Here are some other important facts to keep in mind about IRS payment plans:

• Penalties and interest continue to accrue until your balance is paid in full. Make payments as quickly as possible to limit fees.

• Your refunds will be applied to your balance due until the payment plan is satisfied.

• You must stay compliant with filing and paying all current and future taxes owed while on a payment plan.

• The IRS can terminate your agreement if you default on payments or break the terms.

• Bankruptcy and other debt relief options will typically terminate an existing IRS installment agreement.

• Cancelling a payment plan yourself requires submitting an IRS Form 1234. The IRS cannot approve another plan for 12 months.

Get Professional Support for Your IRS Payment Plan

Navigating IRS payment plans, managing new tax bills, and avoiding defaults can be complex. Getting expert help goes a long way towards effectively resolving your tax debt. Companies like Tax Defense Network offer professional services to assist with:

• Recommending the optimal payment plan for your financial situation

• Strategizing the best options for handling additional tax debt

• Amending or reinstating IRS installment agreements

• Appealing if the IRS rejects your proposed payment plan terms

• Reducing penalties to help make a payment plan more affordable

• Evaluating alternative options beyond just amending a payment plan

Don’t take on IRS payment plans alone. Lean on tax resolution pros to understand your options and ensure you avoid future issues. Support from an expert representative makes a big difference in getting your tax debt paid off for good!