Can a Taxpayer receive a tax refund if they owe the IRS for prior years taxes?
A commonly asked question is "Can a Taxpayer receive a tax refund if they owe the IRS for prior years taxes and they have an agreed installment payment plan to pay for these tax liabilities?"
Whenever a taxpayer has accepted a payment plan with the IRS to pay for prior year's outstanding tax liability, one of the condition of the agreement is that any potential tax refund due to the taxpayer in a future year would be applied against the amount that is owed.
Thus, the taxpayer may not get all of the tax refund assuming they owe past-due federal tax. The IRS will automatically apply the refund to the taxes owed. Clearly, if the refund does not take care of the prior years outstanding tax liabilities the taxpayer must continue to make the timely installment agreement.