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Category: Tax
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Experience:  CPA with tax experience.
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If I can’t pay my taxes will this affect last year's taxes?

Resolved Question:

We are on an installment agreement with the IRS from last year and still owe them about $2,200.00 from 2008 (pay them monthly, on time, no problems). We owe even more this year ($2,600). If I cannot pay the tax amount for 2009 and need help again, does this cancel my installment agreement for 2008? We're not sure whether to call and work with them tomorrow or file an extension (which to me is just putting off the inevitable) or what to do. Please help.

Submitted: 6 years ago.
Category: Tax
Expert:  JKCPA replied 6 years ago.


Thanks for your question.

If you cannot pay your 2009 tax amount owed, you should go ahead and file your return by today. An extension of time to file will not help since you will owe more penalty and interest when you actually file the return.

The phones at the IRS will be very busy today, so it would be better to call later. After you file your return today, you should wait for the return to be processed which can take from 2-3 weeks if you e-file or 4-6 weeks if you file a paper return. Then, you can call the IRS and ask that your installment agreement be restructured to include your 2009 balance. They may be able to add your 2009 balance to your installment agreement or they can instruct you what to do.

You should consider either increasing your withholding allowance on Form W-4 or making estimated tax payments in order to avoid owing large amount of taxes in later years.

For reference, see

Hope this helps,

Best regards

Customer: replied 6 years ago.

What concerns us is the following paragraph on the statement we get from the IRS every month:

"New or additional taxes that become due and are not paid will default or terminate this agreement"

We have paid them religiously every month since the agreement was set up and are scared that they will terminate our agreement because of this new tax and dive into our bank account and take our living expenses or sue us or something. We've been taxpayers for over 25 years and last year and this year are the only years we have been unable to pay. Agreed on increasing our withholding allowance that has already been done for this year.

Expert:  JKCPA replied 6 years ago.

That sentence from your notices will apply if you do *nothing* to deal with the new tax balance owed for 2009. However, if you follow my instructions above and ask the IRS for a restructured installment plan, this should not happen.

From the IRS web site: "If you already have an installment agreement from a previous tax debt and your financial situation has changed, we may be able to modify or restructure your installment agreement to include additional amounts owed into one agreement. Additionally, a Collection Information Statement may have to be completed to further illustrate your financial situation. If an installment agreement is modified, reinstated or restructured, a $45 user fee may be charged.",,id=156495,00.html

Hope this helps,

Category: Tax
Satisfied Customers: 5883
Experience: CPA with tax experience.
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