Can You Get a Tax Refund If You Make Payments on Back Taxes?

by Denise Caldwell

Taxpayers who do not pay their taxes in full before the April 15th deadline for the prior tax year will owe tax, penalties and interest. Unfortunately, any refund available for a subsequent tax year will go toward the tax debt and not to the taxpayer, as the Internal Revenue Service’s primary concern is with recovering the tax owed.

Process

Taxpayers who owe back taxes to the IRS can make payments online or mail payments in to the IRS. Make a free online payment by using the Electronic Federal Tax Payments System (EFTPS) website.

Installment Agreements

You can set up an installment agreement with the IRS by completing form 9465 and mailing it to the IRS or logging on to the IRS’s Online Payment Agreement Application. Once the installment agreement is in force, you will make equal monthly payments to IRS until the tax is paid in full.

Offsets

Having an installment agreement in force prevents the IRS from taking action against you to collect the debt, but it does not prevent the offset of your refund. Any payments you make, whether structured by an installment agreement or mailed in intermittently, are applied to your back taxes until the tax is paid in full. Any refunds for which you are eligible will be applied to your back taxes even if you are making payments.

Joint Responsibility

If you and your spouse file a joint return, both of you are responsible for the back taxes. What this means is that both spouses are held responsible -- jointly and separately -- for the back tax, interest and penalties that accrue while the tax is unpaid. The entire refund from the joint return, including the portion of overpayment that came from the non-owing spouse, will go to pay back taxes.

Considerations

Once the IRS applies your refund to your past due taxes, you will receive a letter (CP 49) in the mail from the IRS advising you that your refund has been applied to taxes you owe. If you feel the offset is in error, you can call the IRS at 800-829-1040.

About the Author

Denise Caldwell is a finance writer who has been writing on taxation and finance since 2006. Her articles appear regularly on websites such as Gomestic.com and MoneyNing.com. She has taken what she learned while working at the IRS to provide readers with helpful tax and finance tips. Caldwell received a Bachelor of Arts in political science from Howard University.

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