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Clarification on IRS Payment Arrangement and Payment History
If someone has been on a payment arrangement with the IRS . I know you have to show payment history. Has a history of payments spanning multiple years each month 297.00. In September 2024, payment amount was adjusted, with the new payments set to begin in November. Per letter from IRS. However, the payments didn’t actually start until Feb 2025.
Will he still be required to show three payments of the new amount before proceeding?
Thanks in advance for any insights!
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2 Replies
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An inquiry regarding IRS payment arrangements and their payment history.
Because I’m not an IRS specialist, I will attempt to offer what I can based on my comprehension of the logic.
When a taxpayer enters into an IRS payment arrangement with the IRS, they need to make timely payments towards the required minimum to reasonably demonstrate good faith toward honoring their tax payment. For most financial dealings, the IRS would first expect at a minimum three (3) payments to be paid routinely over a period of time prior to considering their request for funding or any other form of transaction.
In your case, the payment arrangement was modified in September 2024, with new payments expected to commence in November 2024. They, however, did not actually commence until February 2025, which creates a period of no payment.
To respond to your concern; Yes, the person will most likely still need to exceed three payments of the lesser amount before moving on. The IRS is interested in tracking a reliable account to ensure the taxpayer demonstrates consistency in their repayment behavior.
The interval between payments in November 2024 and February 2025 may not be regarded as ‘consecutive’ due to the absence of payment during this period. This is referred to a new period which may start with a new arrangement, which means that the person must make three consecutive payments of the new amount ($297.00) in order to be considered in good standing.
The individual also has to pay attention to the initial communication which applies as consideration for meeting the rules laid forth by the IRS. Later on down the line, this individual may run into additional problems that require this documentation being filed, and then contact the IRS in order to explain these problems.
If any of these two case scenarios arise, the customer service for the IRS is the ideal expert to approach in case more queries arise post clarifications, or if steps are left without being taken. This is true in any circumstance along with for those that are looking for step by step answers.
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Great question and many conflicting or vague answers. I have originated and helped many mortgage loan originators with IRS payment agreements and qualify and get approved for a loan. On FHA loans, as long as you have a written payment agreement with the IRS and have been paying the minimum payment as agreed on the written payment agreement for three months, you are eligible to qualify for an FHA and conventional loan. If the payment increases, the new increased payment will be used for debt-to-income ratio calculations. The previous monthly payment gets replaced with the new payment. HUD allows you to go on a written payment agreement on federal income taxes that are in arrears and federal income tax liens as long as you have made three timely payments.
Fannie Mae and Freddie Mac allow you to go into a wetten payment agreement on federal income taxes that are in arrears with no waiting period. There is no three-month minimum payment to the IRS required on conventional loans. However, FANNIE MAE and Freddie Mac do not allow borrowers who have a tax lien to go on a written payment agreement. You cannot qualify for a conventional loan with a federal tax lien. You need to pay off the federal tax lien to qualify for a conventional loan.
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