If i have a Payment Plan with the IRS will they take my refund?

In recent times, late payment taxes are being handled and are monitored through Internal Revenue Services (IRS). One has to act proactively and negotiate a payment plan in case there are late tax payments and one is unable to timely carry out their taxation or the tax falls out of their budget.

However, the concerned question that if one as the payment plan with the IRS agreed upon, will they allow a refund to made at all? In order to answer this concern, we may have to go through an understanding of services provided by the IRS for payments as well as agreement plans for taxation.

Starting anew


Fresh start program geared up in 2011 by IRS and allowed some respite for the late payers of tax to pay off the liabilities that hold them for tax liabilities.

Doug Shulman who was the commissioner to IRS at that time had said that we are introducing a fundamental change to our system that may provide the taxpayers to pay off their taxes with a fresh start.

It does provide the opportunity of paying taxes on monthly basis to show the positive attitude of the people to pay off taxes timely and appropriately.

Changes that were of particular focus by IRS

IRS made the fresh start program to allow people a chance to pay off their taxes responsibly with slight reforms that can be presented as follows:

  • The threshold for dollar is raised when the liens are generally issued which makes only a few tax liens to be issued.

It makes it easy for the taxpayers to obtain lien withdrawal that can be performed after the taxation bill. When the taxpayer enters a direct debit installment, the liens can be withdrawn.

  • Installment agreements are much milder and easier to follow for those struggling with their small businesses.

Offer in compromise is a program that can be expanded to cover as many taxpayers as could be possible to allow for ease of return of tax payments to the IRS.

How one can calculate their tax amount?

Free tax refund calculators are available online to give one an idea of how much they may owe the IRS to the formation of these reforms and to carry out the tax returns accordingly.

Tax return guidelines are very important to be carefully evaluated before one can fulfill the terms and is able to return the taxes accordingly.

It is necessary that one evaluate the requirement mentioned in tax return and return their taxes accordingly if they fall in the criteria to return taxes to IRS and make a good payment plan. 

The tax return documents should be complete and to ensure that one does not hold any confusion whatsoever while carrying out a reply to the online system of payment, they must answer all the questions correctly to allow them to make an honest deduction of services in their favor.

Anything that may not be properly understood and is making one wonder the changes missing in the data of present as compared to the data of the past year is by retuning the current tax of the year.

While it may be alarming if one has to pay tax bills that rise over time without the change of person’s condition then a need for investigation becomes necessary for such situations.

The IRS can make mistakes too. If one is receiving a letter for tax payment from IRS mention of due time left to carry out the payment then don’t assume it final and could be mistaken on the part of the IRS which would require correction and clarification in that case.

Underpayment of taxes to IRS and penalties

If one pays taxes inadequately but did not considerably suffer much taxation the previous year, they would not have to pay any penalty. That option is only available as long as one pays their taxes within the due date. 

TaxAct regulates if the safe harbor rule decreases any penalties and interest. The software works to calculate the due amount of taxation that may be required to be submitted in the current year while evaluating the liability of tax for the previous year.

How one can settle down tax payment or reduction of penalties?

The reduction of taxation or settlement of penalties can only be carried out when the taxpayer writes down to IRS in written by clearing situation with clear evidence.

➡LEARN MORE: When and Why Banks Report Check Deposits to IRS?

Filing return to IRS

One has to be vigilant to file returns and pay taxes on time to IRS as the service itself is struggling hard enough to make it easy for the taxpayers who have been stressed hard to repay their taxes.

If someone is unable to pay the lump sum amount of tax they should still continue to file the return anyway as most of the times those unable to pay their lump-sum tax amount and without filing return are often charged with heavy penalties that are much greater than the original taxation penalties.

Installment agreement to repay taxation

The success to come to an agreement with IRS to return tax amount on monthly basis depends on:

  • Tell IRS that you can pay the debt in six years rather than the exact estimate of the year which should ideally be less than what is given to IRS so one can return the amount time and without distress.

To negotiate to an agreement, one must offer monthly installments to be equal or higher than IRS perceived amount that help both the parties to come to an agreement

  • Regular payment for taxation should be tied and correspond to IRS criteria. For instance, one may have to cut a check in favor of the IRS but they must first cut the household expenses from the total income so they do not have to suffer penalties while the return of taxation on monthly basis is carried out timely.

However, one must keep in mind that the penalties are still possible despite timely installment payment if one carries the previous balance due for payment of taxation.

Now the question can be answered with regards to payment of taxes which states concern that if one has a payment plan with IRS, will they take their refund?

Well, the IRS automatically applies refund when during the time of agreement to conditions of installment agreement against the taxes one may owe.

But as this is the part of the agreement that refund the overpaid amount, this does not become applicable to regular monthly installments for which one has to continue making payments according to the schedule.

Sticking to the schedule of payment

Once all agreements and terms are decided upon the payment plan and situations are clarified one must stick to the timely payment of the taxation otherwise the penalties would befall which can lead to seizing of property as well as the freezing of accounts.