Can You Renegotiate the Terms of Your Long-Term Payment Plan?

Can You Renegotiate the Terms of Your Long-Term Payment Plan?

• Jun 15, 2024

Renegotiating the terms of your long-term payment plan with the IRS can be crucial if your financial situation has changed and you can no longer meet the agreed-upon payments. Fortunately, the IRS does allow for the renegotiation of payment plans under certain circumstances. This guide will walk you through the process, the factors that impact your success, and what steps you need to take to adjust your payment plan.

Understanding IRS Long-Term Payment Plans

An IRS long-term payment plan, also known as an installment agreement, allows taxpayers to pay their tax debt in monthly installments over a period of time, typically extending beyond 120 days. These plans are designed to make it easier for taxpayers to manage their debt without facing severe penalties or aggressive collection actions.

Reasons for Renegotiating Your Payment Plan

Life can be unpredictable, and your financial circumstances may change after you have set up a payment plan with the IRS. Common reasons for seeking to renegotiate your plan include:

• Loss of income or employment
• Significant increase in necessary living expenses
• Unexpected medical expenses
• Major life events such as divorce or the birth of a child

Eligibility for Renegotiation

To be eligible to renegotiate your IRS payment plan, you must meet specific criteria. The IRS typically considers the following factors:

1. Current Compliance: You must be current with all filing and payment requirements. This means you have filed all necessary tax returns and are up to date with any other payments due to the IRS.
2. Change in Financial Situation: You must demonstrate a significant change in your financial situation since the original payment plan was established.
3. Reasonable Cause: You should be able to provide a reasonable cause for your inability to continue making the agreed-upon payments.

How to Request a Renegotiation

Renegotiating the terms of your IRS payment plan involves several steps:

1. Gather Financial Documentation: Before contacting the IRS, gather all relevant financial documentation that demonstrates your current financial situation. This includes:

• Recent pay stubs or proof of income
• Bank statements
• Monthly expense reports
• Documentation of any significant financial changes, such as medical bills or layoff notices

2. Contact the IRS: Reach out to the IRS to request a renegotiation of your payment plan. You can do this by:

• Calling the IRS at the phone number provided on your installment agreement notice
• Using the IRS online payment agreement tool on the IRS website

3. Submit Form 9465: Complete and submit Form 9465, Installment Agreement Request, if you are requesting a new agreement. If you are modifying an existing agreement, you may need to submit Form 433-D, Installment Agreement, along with your financial documentation.
4. Provide Updated Financial Information: During the renegotiation process, you will be required to provide detailed information about your current financial situation. The IRS may ask for:

• Form 433-F, Collection Information Statement, which details your income, expenses, assets, and liabilities
• Additional supporting documents that verify your financial claims

5. Negotiate Terms: Work with the IRS representative to renegotiate the terms of your payment plan. This may involve:

• Adjusting the monthly payment amount to better fit your current financial situation
• Extending the length of the payment plan to lower monthly payments
• Requesting a temporary suspension of payments in extreme cases

Factors Impacting Renegotiation Success

Several factors can impact whether or not the IRS will approve your request to renegotiate the terms of your payment plan:

1. Financial Hardship: The IRS is more likely to approve renegotiation requests from taxpayers who can demonstrate significant financial hardship. Providing detailed and accurate financial information will be critical in making your case.
2. Compliance History: Your history of compliance with IRS requirements will play a significant role. Taxpayers who have consistently filed their returns on time and made timely payments are more likely to receive favorable consideration.
3. Payment History: If you have a history of making timely payments under your current installment agreement, the IRS may be more inclined to work with you to adjust the terms.
4. Reasonableness of Request: The reasonableness of your request will be evaluated. For example, asking for a modest reduction in monthly payments due to a slight income decrease is more likely to be approved than requesting a significant reduction without sufficient justification.

Renegotiating the terms of your long-term payment plan with the IRS is possible if you can demonstrate a significant change in your financial situation and provide all necessary documentation. By understanding the eligibility criteria, preparing thoroughly, and communicating effectively with the IRS, you can increase your chances of successfully adjusting your payment plan to better suit your current needs.

If you find the process overwhelming or need professional assistance, contact the IRS Advocates today. We can provide valuable guidance and help ensure your request is handled smoothly and efficiently.