Can You Have 2 IRS Payment Plans?

Dealing with tax debt can be a stressful experience, and an IRS payment plan, also known as an Installment Agreement, is often a lifeline for managing what you owe. It allows you to make manageable monthly payments over time. However, if you find yourself facing a new tax bill while already on a payment plan, you might wonder about your options. This leads to a common and important question for taxpayers navigating their financial obligations.

Understanding IRS Installment Agreements

Before diving into the specifics of having multiple plans, it's helpful to understand what an IRS Installment Agreement is. It's a formal arrangement with the Internal Revenue Service that lets you pay your tax liability in monthly installments for up to 72 months. These plans are designed to help taxpayers who cannot pay their full tax debt at once. The IRS offers both short-term plans (up to 180 days) and long-term plans, each with its own set of rules and potential fees.

The General Rule: One Payment Plan Per Taxpayer

For most individual taxpayers, the IRS generally allows only one active Installment Agreement at a time. The primary reason for this rule is to ensure that the payment plan is affordable and that you can successfully pay off your total tax debt. The IRS assesses your ability to pay based on your entire financial situation, and creating multiple, separate payment streams could complicate that assessment and potentially set you up for default. Their goal is to create a single, sustainable payment structure.

What Happens When You Owe More Taxes?

Life happens, and it's possible to incur a new tax liability while you're still paying off a previous year's debt. So, what do you do? Instead of starting a second plan, the standard procedure is to modify your existing one. If you fall behind or owe more, the IRS will typically require you to add the new tax debt to your current Installment Agreement. This will likely result in a recalculation of your monthly payment amount. Navigating the question of can you have 2 irs payment plans can be confusing, but the focus should be on adjusting your single existing agreement.

Revising Your Current Agreement

To add a new tax bill to your plan, you'll need to contact the IRS or use their Online Payment Agreement tool. They will review your updated financial situation and the new total amount owed to determine a revised monthly payment. It is crucial to be proactive about this. Ignoring a new tax bill while on a payment plan can lead the IRS to terminate your agreement, which could trigger more aggressive collection actions like liens or levies.

Exceptions and Special Circumstances

While the one-plan rule is standard for personal income taxes, there can be exceptions based on the type of tax owed. For instance, a business owner might have one Installment Agreement for their personal income tax liability and a separate one for their business's payroll taxes. This is because they are considered distinct tax entities. However, for an individual's personal tax obligations (Form 1040), the debt is typically consolidated into a single plan.

When IRS Payments Become a Struggle

Sometimes, even with a payment plan, an unexpected expense can make it difficult to cover your monthly IRS obligation. A car repair, medical bill, or sudden drop in income can throw your budget off track. Missing an IRS payment can jeopardize your agreement, so finding a short-term solution is key. In these situations, an emergency cash advance can provide the funds needed to stay current and avoid default.

Exploring Financial Safety Nets

If you need a small amount of money to bridge the gap until your next paycheck, options like a fast cash advance can help. Unlike traditional loans, some modern financial apps offer advances without interest or hidden fees. For example, Gerald provides fee-free cash advances that can be used for any purpose, including making a critical payment to the IRS. This type of financial tool helps you maintain your good standing without adding to your long-term debt burden with high interest rates.

Other IRS Debt Relief Options

If your financial situation has changed significantly and you can no longer afford your Installment Agreement, even after revision, you may qualify for other IRS programs. An Offer in Compromise (OIC) allows some taxpayers to resolve their tax liability for a lower amount than what they originally owed. Another option is Currently Not Collectible (CNC) status, where the IRS temporarily pauses collection efforts if you can prove you're unable to meet basic living expenses. Exploring these alternatives with a tax professional can provide a path forward.