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[quote=Anonymous]FY 2010, our accountant filed our tax return incorrectly, totally by an honest mistake, which resulted in a higher tax refund. Last year we received a letter from IRS stating that we would have to pay them ~  $3,500 back that we got as an extra refund. We never have extra money laying around as we live paycheck to paycheck, 52k/year with three kids under 10, paying $1,500/month in rent as well as paying off huge credit cards debt that we raked up when DH got unemployed and I was in school. So we asked IRS if we can go on a payment plan. They agreed on a 60-month installment plan and we started paying them monthly.

Fast forward, IRS took the remaining balance, that we owe from 2010, out of our tax refund FY 2012 after we filed our taxes, which is leaving us with a very low tax refund.  
They took the amount without giving us any heads up or prior notification. I know it’s their money that we owe and we are honestly willing to pay it back. However, IRS taking the amount off from this year refund came to us as a surprise, as we thought that the signed agreement for five year installment plan was an agreed upon installment plan for five years and we were making our monthly payments on time. I, for some reason, had the understanding that IRS will take such measures: reducing tax-refund or wage garnishment, if the individual is not willing to pay the owed amount and is trying to escape the system.

We were really counting on this years refund money to pay off some of the credit card settlement amount that is scheduled to go out in two weeks.

I am just curious if this is the usual procedure: IRS taking the owed money off the refund without any prior notification, even if the individual is making monthly payments. Has anyone ever been in this situation? Should we call the IRS or will it not make any difference?
How will we know that we are off the payment plan now?

I am honestly clueless.[/quote]

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