Getting help with your tax issue is the first step toward resolution. But sometimes, you may rush into an IRS payment plan and find that it’s not working out. Your monthly payment could be too expensive for your budget, or maybe you didn’t research enough about alternatives before signing on.

Can you switch an IRS payment plan to something that better fits your needs? The short answer is “yes.” You have options for other forms of relief. However, there are certain IRS procedures to follow to make sure you avoid penalties. It’s also a must to review qualification requirements for any option you’re considering.

The good news is that you don’t have to stay with your payment plan if it’s not working. Find out how to make the switch to another option when you have an IRS payment plan, as well as what to do if you decide you want to modify your IRS payment plan. When you need help along the way, reach out to Seattle Legal Services to talk to a tax expert.

Key takeaways:

  • You don’t have to keep your IRS payment plan if it’s not working. You’re not stuck and can switch to a different relief option.
  • Signs your IRS payment plan isn’t working include unaffordable payments, missed deadlines, financial hardship, or growing penalties and interest.
  • Consider alternatives like an offer in compromise, hardship status, partial payment installment agreement, penalty abatement, or innocent spouse relief to find relief.
  • Modify or replace your current payment plan through the IRS’s Online Payment Agreement (OPA) tool.
  • Act quickly to avoid default or additional penalties. You also want to avoid serious IRS collection actions, like liens and levies.
  • Work with a qualified tax professional to find the right relief option for you and avoid getting stuck in another plan that doesn’t work.

Signs Your IRS Payment Plan Isn’t the Right Fit

Agreeing to a payment plan with the IRS is often the first step to getting out of tax debt. But you may also have agreed to something that no longer works for you–or maybe never did. Reasons include:

  • You can’t afford the monthly payment: The monthly payment you agreed to probably looked a lot more manageable than your full tax balance. But now, you’re realizing your budget just doesn’t allow you to make that installment payment comfortably.
  • You’re experiencing financial hardship: Unexpected life events happen, and you may be going through something major, like losing a job. It could be only temporary, but you’re still having trouble complying with your payment plan.
  • You keep missing payments: Missing payment deadlines can lead to defaulting on your plan, which means more penalties and trouble with the IRS.
  • You want to explore settlement options: When your tax debt is so significant that even a payment plan isn’t really making a dent, you may qualify for another option that will allow you to settle your debt with the IRS for a lower amount.
  • You’re overwhelmed by penalties and interest: Unfortunately, interest and penalties are still a reality when you’re paying off your debt over time. You may be looking for an option that will help you get on top of that ever-increasing balance.

These are all signs that your current IRS payment plan isn’t cutting it to get you out of debt and back in good standing. If your issue doesn’t quite align with these common issues, talk to the team at Seattle Legal Services to find out more about your options.

IRS Payment Plan Alternatives

You need the right tax relief option that meets the needs of your current financial situation while helping you get out of debt. So, what are your options when you’re hoping to switch from a payment plan?

Offer in Compromise (OIC)

An offer in compromise, or OIC, is an arrangement with the IRS to settle your debt for less in exchange for making a lump sum payment (or up to 24 installments). If it sounds too good to be true, that’s because it can be hard to get approved for an OIC. You essentially have to show that your current finances don’t allow you to pay off your debt over time through a payment plan. However, if you do qualify and get approved, it can be an effective way to find some relief and get back on your feet.

Hardship Status

The IRS also grants something called currently not collectible (CNC) status to taxpayers who are going through temporary financial hardship. This puts a pause on your account, so they won’t try to collect from you. Note that CNC status is only temporary, so once your financial situation improves, you’ll have to start paying again.

Partial Payment Installment Agreement (PPIA)

You may be able to settle your debt through a partial payment installment agreement (PPIA). These are payment plans for taxpayers who can’t pay what they owe by the collection statute expiration date (CSED). With a PPIA, you can pay a lower monthly payment amount until the CSED is up, and the IRS won’t try to collect the rest of the debt at that time.

Penalty Abatement

If penalties are your main issue, you could pursue penalty abatement, where the IRS will waive or reduce your penalties. You typically have to show that you have reasonable cause for the mistake that led to the penalty, or it must be your first penalty in the last three years with otherwise good tax compliance.

Innocent Spouse Relief

If you filed jointly with a spouse and the tax debt was from your spouse’s actions that you didn’t know about, you could qualify for innocent spouse relief. If so, you won’t be held liable and may find relief for their portion of the tax liability.

How to Request a Modification or Plan Replacement

Your problem may be solved with a quick adjustment to your existing plan. This will save you a lot of headaches. The change could be your payment deadline each month or your payment amount, for example. Some changes you can make online with just a few steps.

To change an IRS installment agreement, head to the Online Payment Agreement (OPA) tool where you manage your plan. You can adjust the terms of your current plan on the payment options page, whether you need to change the type of plan you have, the amount of your payment, or the due date. Just make sure your new desired amount meets the IRS requirements for minimum required payments. If you can’t afford that minimum amount, your next step is to send in Form 433-F, which provides information about your finances to the IRS and helps you qualify for another option.

How to Avoid Defaulting on Your Plan

Remember that you have to comply with the terms of your payment plan while it’s still in effect; otherwise, you could default on your plan, which will lead to more trouble. Follow these steps to avoid defaulting, ensuring you make the switch the right way.

Be Proactive

Act quickly when you want to make a change or cancel your IRS payment plan. You don’t want to risk missing a payment or failing to meet your requirements while you figure out what option to apply for. As soon as you realize that your plan isn’t working for you anymore, take steps to get a better alternative.

Request a Modification Online

If your issue is easy to resolve, log in to your account and request the chance immediately. For example, if you want to change your payment deadline because of when you get your paycheck each month, simply change your payment date through the OPA tool.

Set Up Direct Debit

A direct debit installment agreement can help you keep up with your payments, especially if your main problem is missing the due date. The IRS will automatically withdraw your payment on the applicable date, so you don’t have to worry about forgetting.

Reinstate Your Plan Online

If you defaulted on your payment plan, you can use the OPA tool to reinstate it. However, note that you may have to pay a reinstatement fee, depending on the situation.

Keep Up with Your Other Tax Requirements

To stay in good standing with the IRS and to avoid default, you need to file your tax returns on time and make your tax payments on time.

Work with a Tax Expert

When you can’t comply with your current IRS payment plan terms, and you’re not sure what other option you qualify for, talk to a tax professional. The legal experts at Seattle Legal Services will review your situation and guide you through the process of applying for the right alternative.

IRS Collection Enforcement Actions

Acting quickly to avoid payment plan default is required to prevent any serious collection action the IRS may take. Here’s a look at how the agency enforces collection when you don’t pay on time or fail to comply with plan terms:

  • Default notices: The IRS will alert you that you defaulted on your payment plan via notices sent through the mail. Never ignore these notices.
  • Penalties: You will likely face additional penalties when you default.
  • Federal tax lien: When you owe the IRS money and you fail to pay, the agency may file a federal tax lien, which alerts your other creditors that the IRS has a right to your property.
  • Tax levy: A levy is when the IRS seizes your property to cover your tax debt. The levy could include your home or other real estate, assets, financial accounts, or wages.

Needless to say, you don’t want to be in a situation where the IRS comes after you. Don’t put your home or finances at risk. Act quickly and follow all IRS protocols to find the right option to pay what you owe.

Work with a Tax Professional to Find the Right Option

When you’ve decided that your current IRS payment plan just isn’t working, it’s time to switch to an option that does. Don’t lock yourself into the wrong form of tax relief again. Work with a tax expert who can ensure that doesn’t happen.

The team of tax professionals at Seattle Tax Attorney is ready to guide you through your next steps, whether that means applying for a new payment plan, offer in compromise, CNC status, PPIA, penalty relief, or innocent spouse relief. We’ll review your situation thoroughly and figure out what is possible to help you find relief from your tax debt. Contact Seattle Legal Services today to get started with a better way forward.

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