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Tax question: I have an installment agreement with the IRS

Tax question: I have an installment...
Tax question:
I have an installment agreement with the IRS for past tax years (2014-15) and have been paying $500 a month on about $27,000,
For this past tax year (2016) I paid my tax bill in full with no need for a payment agreement.
However, I just received the CP523 notice from tax years 2014 and 2015 "Intent to Levy" saying that money is now due.
I wanted to get some info before I tried to call the IRS. Any ideas?
Did paying my taxes in full this year mess something up?
Thanks,
Jason
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Answered in 16 minutes by:
7/17/2017
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15,887
Experience: 15years with H & R Block. Divisional leader, Instructor
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Hello, I'm Robin. Welcome to JustAnswer. I'm reviewing your question now and typing up my reply. I'll post that in just a few moments.

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The payment did not mess up anything but the fact that you owed may have been the cause for the notice. Although a failure to make a payment is the most common reason, the IRS will default an installment agreement for the following reasons too:

  • Failure to meet the required estimated tax payments or deposits;
  • Not fully paying the amount due on the return most recently filed; or
  • Not providing the IRS with updated information when they ask for it.

If you had a balance due for 2016 then they may see that as not paying throughout the year (estimates or correct withholding).

As you paid the debt in full for 2016 they should reinstate if they did terminate the agreement. Call them.

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Customer reply replied 4 months ago
Ok, and yes, I was able to pay 2016 in full, as I didn't want to continue asking for new installment agreements, and my business is now profitable, but its hard to make the new payment in full and keep up on the old, but they have been pretty easy to work with.
Will they expect me to start paying the estimates too throughout this next coming year, and how much do I have to try and start paying for these estimates?

Estimated tax is a requirement but if you can show a reason that you cannot then they may accept that.

You generally have a penalty when you do not so you are paying less if you make estimated payments.

I cannot say for sure that this will not be an issue.

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Your estimates are based on your Net income. There is no one amount for all. I would suggest you do an estimate for each quarter then pay as much as you can.

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Customer reply replied 4 months ago
How much is the estimated tax portion, isn't it 90% for the previous year's amount paid quarterly?

Individuals, including sole proprietors, partners, and S corporation shareholders, generally have to make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed.

That 90% is the avoidance of penalty.

If you didn’t pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller.

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I sincerely ***** ***** has been useful.

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Customer reply replied 4 months ago
Ok, I haven't paid any estimates yet for the current year, as I wanted to pay 2016 in full, which is the first time I have been able to do so!
So, you would advise that I start paying my estimates (my tax bill from last year - divided by 4) by Sept 15? 100% of last year's amount will be smaller than 90% of this year's

Yes

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You would avoid a repeat of this for 2017 and you can advise the IRS agent (when you call) that you have taken steps to meet that obligation for 2017.

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Customer reply replied 4 months ago
Ok got it, so, at least that I show them that I am starting to pay estimates now, seems like they will work with me?

Yes, it shows your intent to remain compliant (always a good thing).

Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15,887
Experience: 15years with H & R Block. Divisional leader, Instructor
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Robin D. and 87 other Tax Specialists are ready to help you
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Customer reply replied 4 months ago
ok thanks for the help!

You are most welcome.

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Robin D.
Robin D.
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Category: Tax
Satisfied Customers: 15,887
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