Can You Have 2 Installment Agreements With the IRS?

The Internal Revenue Service (IRS) offers installment agreements as a way for taxpayers to manage tax obligations when they cannot pay in full immediately. The IRS typically consolidates all outstanding tax liabilities from various periods into a single, comprehensive agreement. This approach streamlines the payment process for both the taxpayer and the agency.

Understanding IRS Installment Agreements and Consolidation

An IRS installment agreement (IA) provides a structured payment plan for taxpayers to pay off tax debt in monthly installments. This helps prevent collection actions like levies or liens. Interest and penalties generally accrue on the unpaid balance until the debt is satisfied, even under an approved agreement.

The IRS primarily utilizes two types of installment agreements for individuals: the Guaranteed Installment Agreement and the Streamlined Installment Agreement. A Guaranteed Installment Agreement is for individual taxpayers who owe $10,000 or less in tax, excluding interest and penalties. To qualify, taxpayers must have filed all required returns, not had a previous installment agreement in the past five years, and agree to pay the debt within three years. This agreement typically does not require a detailed financial review.

The Streamlined Installment Agreement is generally available for individual taxpayers who owe $50,000 or less in combined tax, penalties, and interest. Businesses can qualify if they owe $25,000 or less. This agreement allows for repayment over up to 72 months (six years) and usually does not require extensive financial documentation.

A core IRS policy is to consolidate all outstanding tax liabilities into a single installment agreement, rather than maintaining multiple separate agreements. If a taxpayer has debt from several tax years or different types of taxes, these are generally combined under one payment plan. This consolidation simplifies administrative processes and provides a unified approach to debt management. This means that entirely separate installment agreements for different tax years or distinct tax types are generally not permitted.

Common Scenarios for Multiple Tax Debts

Taxpayers often inquire about multiple installment agreements due to various accrued tax debts. One common situation involves failing to file or pay taxes for several consecutive years, such as owing income tax for multiple years.

Another scenario arises when a taxpayer has both individual income tax debt and business tax debt, such as unpaid payroll taxes for a sole proprietorship. The IRS generally seeks to combine them into a single payment arrangement. This approach ensures a holistic view of the taxpayer’s overall financial obligation to the government.

A frequent situation involves incurring new tax debt while an existing installment agreement is in place. The IRS does not typically establish a second, independent agreement for the new debt. Instead, the existing agreement is usually modified to incorporate the new liability, recalculating the monthly payment based on the increased total debt.

Applying for and Modifying Agreements for Multiple Debts

When addressing multiple tax debts through an installment agreement, gathering financial information is a necessary step. Taxpayers should compile details about their income, expenses, assets, and liabilities. This includes recent pay stubs, bank statements, investment account statements, and a list of all outstanding debts. For larger or more complex tax debts, or if the IRS requests it, taxpayers may need to complete a Collection Information Statement, such as Form 433-F, Form 433-A, or Form 433-B.

There are several ways to apply for an installment agreement that covers all tax debts. The IRS offers an Online Payment Agreement (OPA) tool, often the quickest method for eligible individuals and businesses. This tool allows taxpayers to apply for a payment plan and receive immediate approval if they meet criteria, such as owing $50,000 or less for individuals or $25,000 or less for businesses.

Alternatively, taxpayers can apply by mail using Form 9465, Installment Agreement Request. This form allows taxpayers to propose a monthly payment amount and indicate the tax years or periods involved. Applying by phone is another option, by calling the IRS directly.

If a taxpayer already has an installment agreement and incurs new tax debt, the process involves modifying the existing agreement. This modification can often be done through the IRS Online Payment Agreement tool to revise their monthly payment amount or due date. For more complex situations, contacting the IRS by phone or submitting an updated Form 9465 by mail may be necessary.

If a consolidated installment agreement is not a feasible solution, other IRS collection alternatives may be available. These include an Offer in Compromise (OIC), which allows certain taxpayers to settle their tax debt for a lower amount if they meet specific financial hardship criteria. Another option is Currently Not Collectible (CNC) status, where the IRS may temporarily delay collection if the taxpayer demonstrates an inability to pay due to financial hardship.