I owe taxes for 2011. My refund for 2012 will be enough to cover it and then some. Can I just file as normal and just leave it up to the IRS to take the money they are owed?

I got a letter a week ago. I messed up on my 2011 taxes and I owe money. I will be getting enough of a refund for 2012 that it will cover what the IRS says I owe. Is it ok to just file as normal and just  let the IRS take what they are owed out of this refund?  Or should I still set up a payment arrangement with IRS to pay off taxes owed for 2011? 
  • if the irs intercepts this return for payments old will the refund still be back in the 8-10 days or will it take longer
  • how do i get it taken out of this years refud
  • See answer below
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You can file as you normally would for the 2012 tax year and the IRS will intercept your refund for back taxes owed.  If there is any of your refund left after the IRS takes the taxes, interest and penalties, you will get a refund of the difference.
  • Will there be a delay in the refund since the IRS will intercept the back taxes owed?
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Since you mention a payment plan, that would indicate that you are unable to pay your 2011 taxes in full  at this time.  Paying in full before filing your 2012 return is your best option.

If you owe any money to the IRS they will use any refund you have coming to you to apply to previous tax years including any interest and penalties.

So yes, you can just file normally.  However, be aware that it will take additonal time to process your refund.
  • what if you have filed past returns the irs says you owe but you dispute the claim
  • Good luck, the IRS claimed I owed $499,999 in back taxes due to a clerical error and I still ended up owing $32k despite their error due to not responding to their demand for payment and they never removed the late penalties although they admitted the original charge was an error. They don't handle disputes very well so i doubt they will let you keep any monies regardless they will take the money out and let you fight (i.e. Pay lawyers and accountants) to prove their error...
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