Originally Posted by RicBear7
My question is when I go to the IRS Direct Pay website, it asks for the tax year. I've been choosing the most recent tax year, but it occurred to me recently that I owe more on the earlier tax year and clearly the interest will grow on it faster. So I am curious if I choose the earlier tax year will it be applied to that year specifically? Even though the two years are combined in the installment plan?
If you owe less than $25K, under this plan you can decide how much your monthly payment will be. However, you must pay off your balance within five years. with an installment agreement, interest and penalties will continue to be accrued. One of the ways you can resolve your IRS tax liability is through an installment agreement (monthly payment plan). When you set up your installment agreement, the IRS requires that you include all of the tax years that you owe for in the installment agreement. So, for example, say, if you owe taxes, penalties and interest for 2005, 2006 and 2007, you must include all 3 years in the installment agreement. You could not set up an agreement for just 2006.So, what happens if you have set up an installment agreement and you find yourself owing more tax this year than you can afford to pay back. I guess then, you will be re-negotiating your installment agreement. When you’re in this situation, you should immediately call the IRS and let them know you owe for the current year and you need to include that on your tax return. Depending on the total amount you owe and how long ago you negotiated your payment plan, you may have to go through the whole process of sending in a financial statement and negotiating with the IRS for your payment plan, or, they may simply add that additional tax to your plan.I guess you need to contact the irs for more accurate info on your issue,