The IRS offers payment plans, known as an Installment Agreement, for taxpayers who are unable to pay their tax liability or tax debt in its entirety. This program provides the opportunity to negotiate a monthly payment that easily fits into your budget so that you can remain compliant with your taxes without falling into financial hardship.
Although this service largely helps taxpayers, there are times that a taxpayer finds he or she cannot pay their installment agreement. This could be due to an unforeseen financial hardship, such as loss of employment, death in the family, illness, disability, or something else. It may also happen when it comes time to pay the following year’s taxes and they once again are too high to pay, making it hard to not only continue with the Installment Agreement but also to pay your current taxes.
What Happens If you Miss One Payment?
If you miss one payment but pay it soon after you realize the oversight, then your agreement will remain in place, although you may incur some penalty fees. The IRS has a 30-day grace period during which you can pay your missing payment. After this grace period, the IRS has the right to cancel the agreement, which means you have to pay the entirety of the remaining debt or face wage garnishment, lien, levy, or some other collective action. This also happens if you have not filed your tax returns on time or paid any subsequent taxes in full or renegotiated the plan to include them.
How Do You Know that the IRS Will Take Collective Action?
Before any of this happens, the IRS will send you a notice entitled, Notice of Intent to Levy. You Defaulted on Your Installment Agreement. You have 30 days within receipt of the notice to file an appeal in order to renegotiate your agreement. Once you have scheduled your appeal, then the IRS can no longer take any collection action or any other enforcement of your default until the appeal is complete.
How to Protect Yourself
When you are in default of your Installment Agreement, you face collective action. It also hurts your chances of negotiating any other settlement with the IRS in the future. That is why it is best to take proactive action if you know that your budget no longer can handle the Installment Agreement. You can renegotiate your payment, but you will need to demonstrate the change in your financial status. Even if it is too late and you receive notice in the mail, schedule an appeal right away. This protects you and your assets from any further problems and simplifies the process.
If you are concerned about defaulting on an Installment Agreement or otherwise need to negotiate a tax relief settlement with the IRS, then contact Fidelity Tax Relief today. Our Tax Professionals have years of experience working with the IRS and will negotiate on your behalf for a settlement that works with your new financial situation.