Navigating Tax Refunds with Installment Agreements
Understanding the interplay between tax refunds and installment agreements is crucial for taxpayers seeking financial relief. This comprehensive guide delves into the IRS’s policies and procedures regarding refunds when taxpayers have outstanding payment plans.
Can I Receive a Refund with an Installment Agreement?
No. One of the conditions of an installment agreement is that the IRS will automatically apply any refund (or overpayment) due to you against taxes you owe. This means that your refund will not be applied towards your regular monthly payment. You should continue making your installment agreement payments as scheduled.
Exceptions to the Rule
If your refund exceeds your total balance due on all outstanding tax liabilities, including accruals, you will receive a refund of the excess. However, this is only applicable if you do not owe certain other past-due amounts, such as:
- State income tax
- Child support
- Student loans
- Other federal nontax obligations
Offsetting Non-IRS Debts
If you owe any of the above-mentioned non-IRS debts, the Bureau of the Fiscal Service (BFS) may offset your refund to satisfy those obligations. You can contact the BFS at 800-304-3107 (toll-free) for more information.
Consequences of Refund Offsets
If your refund is applied to your installment agreement or offset against non-IRS debts, you will not receive the full amount of your refund. This can impact your financial situation and ability to meet other obligations.
Additional Considerations
- Direct Deposit: If you have set up direct deposit for your refund, the IRS will automatically apply it to your installment agreement or offset it against any outstanding debts.
- Paper Check: If you receive a paper refund check, you can choose to deposit it into your bank account or cash it. However, if you deposit the check into an account that is subject to garnishment or other legal actions, the funds may be seized to satisfy those obligations.
- Split Refunds: If you have requested a split refund, the IRS will apply each portion of the refund according to the instructions you provided. Any portion designated for your installment agreement will be applied accordingly.
Understanding the IRS’s policies regarding refunds and installment agreements is essential for taxpayers seeking financial relief. By adhering to the guidelines outlined above, taxpayers can avoid potential complications and ensure that their refunds are used as intended. If you have any further questions or concerns, it is advisable to contact the IRS directly for personalized assistance.
THE IRS TAKES MY PAYMENTS BUT, WILL THEY TAKE MY REFUND?
Will my tax refund be applied to my installment agreement?
No, one of the conditions of your installment agreement is that the IRS will automatically apply any refund (or overpayment) due to you against taxes you owe. Because your refund isn’t applied toward your regular monthly payment, continue making your installment agreement payments as scheduled.
Will the IRS take my tax refund if I can’t pay?
The IRS will take your refund even if you’re in a payment plan (called an installment agreement). But if you can’t pay your taxes right away, it’s always best to get into an IRS payment agreement to minimize penalties and interest, and prevent collection enforcement actions. 3. You have one or more unfiled back tax returns.
What happens if the IRS approves an installment agreement?
If the IRS approves an installment agreement, it will generally keep any tax refunds and apply them to your debt. 6.) If the IRS agrees to an installment agreement, it may still file a Notice of Federal Tax Lien . For more information, see Publication 594 , The IRS Collection Process. 7.)
What happens if I don’t pay my installment payments?
Taxpayers who are currently unable to comply with the terms of an Installment Payment Agreement, including a Direct Debit Installment Agreement, may suspend payments during this period if they prefer. Furthermore, the IRS will not default any Installment Agreements during this period. By law, interest will continue to accrue on any unpaid balances.