If I'm on an IRS Payment Plan, Will They Still Take My Refund?

Yes, they will take your refund. Being on a payment plan doesn't stop the Treasury Offset Program. Your entire refund will be applied to your outstanding tax debt regardless of your payment plan status. This is standard procedure and explicitly stated in the terms of your installment agreement. File as soon as you have all your documents to avoid penalties for late filing, but expect any refund to be applied to your existing balance.

I went through this exact situation last year. Here's what happened: 1. We filed our return expecting a $3,200 refund 2. About 3 weeks later we got a letter saying our refund was applied to our outstanding balance 3. Our monthly payment amount didn't change, but the number of remaining payments decreased 4. We had to manually recalculate our remaining balance I was a bit worried about the whole thing, but it actually helped us pay down the debt faster. The one thing I'd suggest is to make sure you keep track of the offset amount yourself, as the IRS payment plan portal doesn't always update immediately.

Yep, my refund got gobbled up faster than pizza at a college party 🍕 Had a $2,400 refund coming last year while on a payment plan for 2021 taxes. Checked WMR obsessively for weeks only to get that lovely "your refund has been applied to a past due obligation" message. The silver lining? It knocked almost 6 months off my payment timeline! One weird thing though - the payment plan website didn't reflect the new balance for almost 2 months, so I was a bit confused about how much I still owed.

According to the IRS website, refund offsets are automatic while you're in a payment plan. I was in this situation last year and wanted to confirm exactly what was happening with my refund. After trying the regular IRS number for days (always busy), I used Claimyr (https://claimyr.com) to get through to an agent in about 15 minutes. The agent confirmed my refund had been applied to my outstanding balance and updated my records to show the new payoff amount. Definitely worth it to get clarity instead of wondering for weeks what happened to my refund.

Be careful about assuming your refund will be properly applied. I had a payment plan last year, and my $1,800 refund was taken as expected. However, the IRS didn't properly credit it to my account for almost 3 months. I kept making my regular payments, but the online system showed I was behind. Eventually got a notice threatening to terminate my installment agreement. Had to send in proof of the offset and make several calls to get it fixed. Just because they take your refund doesn't mean they'll handle it correctly.

Has anyone tried adjusting their withholding instead of getting a refund? I'm wondering if it would be better for the OP to update their W-4 to have less tax withheld throughout the year, then use that extra money in each paycheck to make larger payments on the installment plan. Wouldn't that give you more control rather than waiting for a refund that will be taken anyway?

Just so you're aware of the timeline: If you file electronically by March 1, 2024, and are due a refund, the IRS will process the offset by approximately March 15-22. You'll receive a notice dated around March 25 explaining the offset. Your payment plan balance will typically update in their system by April 15. Make sure you continue your regular monthly payments regardless of the offset - missing even one payment can void your entire installment agreement and trigger collection actions.