June 1, 2016

Denver Tax Attorney   Can the IRS Make Changes to My Installment Agreement?Have you and the IRS arrived at a monthly payment plan due to your inability to immediately pay your taxes in full?

While entering into a partial pay installment agreement with the IRS provides a taxpayer with much-needed relief, the reality is that such relief may only be temporary. Unknown to many is that the IRS has the right to review your installment agreement and even negotiate a new one to see if changes need to be made to your monthly payment—even if you have been filing your taxes and paying them on time.

By law, the IRS is allowed to enter into an installment agreement that will never truly pay them back. Under what is commonly known as a Partial Pay Installment Agreement, the IRS is given a period of 10 years to collect from a delinquent taxpayer. The remaining balance is considered forgiven after the 10-year period expires.

Under the Internal Revenue Code 6159(d), however, the IRS is required to review all Partial Pay Installment Agreements every two years. This means the agency may request you to submit an updated financial statement in order to determine if your payment can be increased based on your current income and living expenses. If your installment agreement payments are insufficient to pay back the IRS in full, then the chances are higher that your agreement will be reviewed.

It is also important to note that even with an installment agreement that will fully repay your debt, it is still possible for the IRS to request for a financial review. The IRS may determine if your financial condition has improved based on a review of your most recently filed tax return.

When your ability to make monthly payments change, it is highly recommended to stay in touch with the IRS. The IRS may consider altering your installment agreement if there is a change in your financial condition, which would involve either reducing or increasing the payment amount previously agreed on. If you miss your payments, you may need to pay reinstatement fees or face the potential termination of your payment plan. The IRS may also choose to revoke the agreement if you fail to file your tax return after an agreement has been made or if you provided the IRS with inaccurate information when negotiating terms for your payment plan.

 

Categories: Blog, IRS, Taxpayers' Rights