Defaulting an IRS Installment Agreement or IRS Payment Plan

default tax payment planDefaulting 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.

Communication is KEY!

You make a great point, communication with the IRS is KEY! If you fall into tax debt it is important to take immediate action, procrastination is NOT an option. While some IRS processes seem/are simple, resolving a tax debt rarely is, which is why it is advisable to get professional help. Not only can a knowledgeable tax attorney advise on tax resolution strategies but they can also help maintain the necessary communication between tax payer and collection agency.

I was told that if you have

I was told that if you have entered into an installment agreement and you end up owing taxes on a future tax return, you will be in default. The last paragraph in this article implies that is not true. Which is correct?

You are right. If you are

You are right. If you are currently in an installment agreement and you end up owing taxes on a future return and you cannot pay those amounts, you will be considered in default. If this is your case, you should contact the IRS immediately when you know taxes are owed and you cannot pay. Depending on how long your you have been in a payment plan and how much you owe in additional taxes the IRS may choose to simply add that amount onto the existing installment agreement or they may make you go through the entire process of sending in detailed financial statements and negotiating a new payment plan with the IRS. The IRS will work with you on this, it will typically result in having a larger monthly payment owed. If you do not work with the IRS right away, they may begin collections against you, so be sure to work with the IRS right when your tax return is complete.


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