An installment agreement is one of the most convenient ways to get out of tax debt, but what if you need to make changes to your plan once it’s active? In many cases, you can make changes quickly and easily through the IRS’ online portal, but depending on the nature of the changes, you may need to contact the agency directly.
The following sections outline how to make changes to your payment plan online, when you need to contact the IRS directly, and what to do if you can no longer afford a standard IRS installment agreement. To get guidance with your IRS tax debt now, contact us at Wiggam Law today.
Installment Agreement Changes You Can Make Online
Whether you set up your payment plan online or through any other method, you can view your payment history and remaining balance through the IRS online portal. If you set up a streamlined installment agreement online, you already have everything you need to sign in. If you’ve never been to the IRS online portal, you will need to verify your identity using your ID and a smartphone.
Once you have an online account, you can request the following changes to your installment agreement online:
- Monthly payment amount – As long as the monthly payments are enough to pay off the debt within six years or by the collection statute expiration date if sooner, you can modify the amount online.
- Due date – You can select any due date from the 1st to the 28th of the month. If you have a direct deposit agreement, this is the date your payment will be withdrawn. If you mail in payments, your payment must be received by the due date.
- Payment method – In all cases, you can switch from mailing in your payment to paying with direct debit. You can also change the bank account for direct debits. If you want to mail in your payment instead of using direct debits, you generally can only do so if you owe less than $25,000 for an individual and less than $10,000 for a business.
- Adding a new balance – You may be able to add a new balance to your existing payment plan online. However, if the online system doesn’t allow this change, you should contact the IRS directly.
- Reinstating after default – If you miss a monthly payment, the IRS will typically send you a notice that your account has gone into default. As long as you act within 30 days, you can usually pay online to get your account back into good standing. In some cases, particularly if it’s been longer than a month, you may need to pay a fee to reinstate your account.
If your request does not meet the IRS’ requirements for the type of payment plan you have, you may need to talk with an IRS revenue officer and file additional paperwork, as explained below.
Additional Forms for IRS Installment Agreements Changes
Here are situations where your requested changes may lead the IRS to ask for a collection statement:
- You want to pay less than $25 per month.
- Your requested monthly payment is insufficient to pay off the balance within six years.
- You want to mail in payments (instead of direct debits), and you owe more than $25,000 ($10,000 for businesses).
- You have incurred a new tax liability, bringing your total due to over $50,000.
As a general rule of thumb, the IRS wants all tax debts paid within six years, and if you cannot do so, the agency will request details about your finances to ensure that you are paying the most you can possibly afford. The agency usually requires Form 433-F to assess taxpayers’ financial situations, but in some cases, you may need to file Form 433-A for individuals or Form 433-B for businesses.
All three of these forms are called Collection Information Statements. They collect details about your income, expenses, assets, and debts so that the IRS can review your financial situation. If you’re paying as much as you can afford, the agency will likely approve your request for changes, and if not, they will most likely require you to make larger payments or even pay in full, depending on the specifics.
Can You Add New Tax Debt to Your Payment Plan?
Be aware that incurring a new tax liability puts you in default of your original agreement. However, in most cases, as long as you meet the following requirements, you should be able to roll the debts together into a single payment plan:
- The total balance due is less than $50,000
- As required, monthly payments are high enough to pay off the total within six years or fewer.
To be on the safe side, make sure you apply as soon as possible. If you don’t address the new debt before the due date, your payment plan may go into default.
Should You Modify Your Payment Plan?
If you cannot afford your monthly payments or if you want to make larger payments to get out of debt faster, you may want to modify your installment agreement. You may also want to request changes if you incurred a new tax balance or want to make changes to your payment method.
What If You’re Experiencing Financial Hardship?
You can modify your payment plan accordingly if you can afford to pay at least $25 per month or the minimum required to pay off the full balance within six months. If not, you should reach out to the IRS or talk with a tax attorney about one of the following alternatives:
- Currently not collectible (CNC) – If you cannot afford to pay anything right now, you can get the IRS to mark your account as CNC. That status will prevent the IRS from coming after your wages or assets, and you will not have to pay anything until your financial situation improves. If you file a return showing a higher income or if the IRS receives other information showing an improved financial situation, you will have to resume making payments.
Your balance will continue to accrue interest and some penalties when you are on CNC status. However, if your finances never improve, there is a possibility that the debt can expire, and in that case, you will not have to pay.
- Partial payment installment agreement (PPIA) – A PPIA is where you make small monthly payments based on the disposable income shown on your collection information statement. The IRS can review your situation every two years (either by requesting a new 433 form or by monitoring the income reported on your tax return). If your finances improve, you will be instructed to make larger payments.
However, the main advantage of a PPIA is that once you reach the debt expiration date, you will not have to pay the remaining portion of the tax debt.
- Offer in compromise (OIC) – With an OIC, you pay a settlement, and the IRS waives the remaining amount of the debt. When you apply, the agency reviews your financial information to ensure you pay the largest settlement you can afford. With an OIC, you also complete a collection information statement, but you use a much more detailed form which is specifically for offers in compromise.
If the IRS accepts your offer, you must stay compliant with tax obligations for the next five years. If you don’t, they can retroactively rescind the offer. However, if your financial situation improves, that’s okay—the settlement still stands.
How Much Does It Cost to Change a Payment Plan?
The IRS charges taxpayers $10 to make changes to their payment plans online and $89 to request changes over the phone or through the mail. If you qualify as low-income, the fee is $10 for online changes and $43 for other changes, but if you meet certain criteria, the IRS may waive these amounts.
What If You Forget to Request Changes to Your Installment Agreement?
If you can no longer keep up with your existing installment agreement, be proactive about requesting modifications online or by calling the IRS. If you don’t and your plan goes into default, you will incur penalties, and the IRS has the right to demand the balance in full and pursue involuntary collections against you.
How to Avoid Incurring New IRS Tax Debt?
Incurring new tax debt is one of the biggest reasons people need to make changes to an installment agreement, and it’s also one of the biggest reasons people default. If applicable, review your W4 and your spouse’s W4s to avoid incurring new tax debt. Ensure you complete them accurately and fill out the sections on second jobs and freelance income. That will ensure that your employer withholds the correct amount and you don’t face a tax bill when you file.
If you work for yourself, make sure that you pay your quarterly estimated tax bills. Consider working with an accountant or using software that will help you estimate how much you owe. If you overpay, you can claim a refund, but if you underpay, you will face penalties and potentially a balance that you cannot afford.
What if I Cannot Pay My Short-Term Installment Agreement?
The IRS allows short-term payment agreements to nearly any taxpayer who requests them. With a short-term agreement, you agree to pay the balance in full within six months of the due date. However, if circumstances change, you may need to set up a long-term installment agreement.
Make sure that you start this process before the due date of the short-term agreement. If you owe less than $50,000, you can apply online. You can call the IRS or file Form 9465 if you owe over that threshold.
What if the IRS Rejects My Modification Requests?
You will often get a fast yes to your requests, but if the IRS rejects your suggested changes, you have the right to appeal. Typically, you must appeal within 30 days. The rejection letter you get from the IRS should outline how to appeal, and if it doesn’t, reach out to the IRS. If you cannot get a favorable resolution with the IRS employee assigned to your case, ask to speak with their supervisor.
Get Help With IRS Payment Plans Today
Need help setting up a payment plan? Want guidance on how to make changes? Incurred a new tax balance and want to roll it into your existing payment plan? Struggling and looking for options? If you have answered yes to any of these questions, we can help.
At Wiggam Law, we specialize in helping individual and business taxpayers who’ve gotten behind on their tax obligations get caught up and back into compliance. To get help now, contact us today. Call us at (404) 233-9800 or fill out our online consultation form to schedule a meeting. We personalize the approach for all of our clients to ensure they get the best outcome possible, and we’d love to help you.