Can I Get an Income Tax Refund If I’m Making Payments on Federal Taxes Owed?

by Lynnette Khalfani-Cox, The Money Coach on December 22, 2011

in Taxes


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Even though many Americans do end up getting a tax refund from the Internal Revenue Service, some taxpayers still owe the IRS money and will not get any type of refund until they clear up their balance.

If you’re wondering if you will get a tax refund when you’re still making payments on an installment agreement or payment plan you set up with the IRS, the simple answer is “no”.

The IRS will use any refunds owed to you to pay down your current balance. This is a condition of the installment agreement you set up when you found out you owed taxes from a prior year, so you may not even see a refund check until that entire balance is paid off in full. The IRS will also automatically apply any tax refunds to any prior tax balance owed, and you will have to keep making payments on schedule or keep having your refund taken, until your balance has been cleared.

Making Payments on Taxes Owed


Carrying a big balance of outstanding taxes can cause some financial distress and you may be wondering how and when you will be able to pay off that balance in full. The good news is that the IRS does accept credit card payments and may even grant you some extra time to pay back your taxes based on your situation.

If you owe $25,000 or less, and you have filed all required tax returns, you can set up an installment plan online with the IRS. An installment plan allows you to pay off your taxes in an agreed-upon time frame, ranging from as little as a few months to as long as 60 months, or five years. You’ll have to fill out Form 9465, Installment Agreement Request.

You can request an extension on payments by putting an application through the Online Payment Agreement section of the IRS website, or by calling 800-829-1040.

Keep in mind that requesting to set up an installment payment that lasts longer than 120 days means you will need to pay a user fee of $105, and $52 for agreements where the payment is deducted from your bank account. For low-income taxpayers, the fee could be as low as $43.


If you want to pay off some of that balance using a credit card, visit sites such as www.pay1040.com, www.payUSAtax.com, and www.officialpayments.com/fed to authorize your payment. This can be a valuable strategy for anyone who is paying a lower interest on their credit cards than the interest imposed by the IRS on the tax balance.

More Information About Your Balances Owed

Whether you decide to set up an installment agreement or a payment plan with the IRS, it’s important that you understand any tax refund owed will be put towards your balance. You will also not get all of your tax refund if you owe federal and state taxes, student loan payments or child support. You can contact the Financial Management Service (FMS) office directly, toll-free at 800-304-3107 for more information.

 


Related Questions:

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Lynnette Khalfani-Cox, The Money Coach

Personal Finance Expert and Co-Founder at Ask The Money Coach.com
Lynnette Khalfani-Cox, The Money Coach is a personal finance expert, speaker, and author of numerous books on personal finance. She appears frequently as an expert commentator on television, radio and in print.

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