Defaulting on an IRS Installment Agreement or Federal tax payment plan will be primarily brought about by a few scenarios. Remember, just because you defaulted does not meet your agreement is terminated. However, regardless of the manner in which you have default, stay in contact with the IRS.
Failing to Make or Missing a Tax Debt Payment
Failing to make even one payment to the IRS will cause you to default on an Installment Agreement. In this case, the IRS will notify you of your current state through a CP-523 that will be mailed to your current address. If you receive this letter be sure to take action immediately as the IRS can proceed with collection activities. Creating an automatic payment plan is the best way to prevent this. When setting up your payment plan, Form 9465 to generate an automatic bank draft. If you are currently enrolled in an IRS payment plan, simply fill out Form 433-D to arrange this.
If you are unable to make the next payment on your Installment Agreement it is essential that you contact the IRS at once. You must explain why you are no longer able to fulfill your monthly payments. The IRS will help you reach a new agreement based on the cause of your financial change and your current type of tax debt payment plan. The IRS will typically wait 30-60 days before revoking an IRS Installment Agreement (especially if it is your first missed payment).
The IRS Finds Out False Information Was Provided
If the IRS finds out that you provided inaccurate information when you applied for an IRS Installment Agreement, you could end up with your Installment Agreement being revoked. Be accurate and truthful when dealing with the IRS always.
You Fail to Pay Taxes In The Future
Just because you are in an IRS Installment Agreement does not mean that don’t have to pay taxes going forward. If you are not a W-2 employee you still need to make estimated payments. If you are a W-2 employee, make sure your withholding is correct. If you owe taxes at the end of the year, make sure you pay them. If you ended up with tax liabilities last year because your withholdings were incorrect make sure to adjust them this year with your employer.