The IRS installment agreement program provides a lifeline to taxpayers who owe back taxes and are unable to pay them all at once. If you set up a payment plan, the IRS will cease enforced collection activities while you pay your taxes in monthly installments over a period of time. For many taxpayers, this is an ideal solution — it allows you to pay your taxes in full without the threat of IRS collections hanging over you. However, under the terms of your agreement, you must submit monthly payments in order for the IRS to continue to suspend collections activities. If you fall behind on your payments or otherwise fail to meet the agreement’s obligations, your agreement will be in default and the IRS could terminate it.
Why the IRS Places Installment Agreements in Default
The IRS may place your installment agreement in default for any of the following reasons:
- You fail to pay an installment payment when it is due
- You fail to pay any new tax liability at the time the tax is due
- You fail to provide the IRS an updated financial statement upon request
- You provided financial information that was inaccurate or incomplete prior to the date the agreement was entered into
- You fail to pay a modified payment amount based on updated financial information
Procedures for Terminating a Defaulted Installment Agreement
While any one of the above actions can trigger a default and the possible termination of your installment agreement, termination does not occur immediately. In most cases, the IRS will notify you in writing that you are in violation of the terms of your agreement and give you 30 days to comply with the agreement before it terminates it. During this time, your agreement is considered to be a “defaulted agreement,” but it is not terminated. If you do not comply with the terms of the agreement by the end of this 30-day period, the IRS will terminate your agreement and collections activities will resume within 90 days from the date the IRS mailed the default notice.
Is it Possible to Reinstate a Defaulted Installment Agreement?
The good news is that it is possible to reinstate an installment agreement that is in default by correcting the issue that caused the default during the 30-day default period. You can do this in several ways, such as:
- Paying any payments you missed
- Timely providing any financial information the IRS previously requested
- Paying any additional tax liabilities
- Adding any additional tax liabilities to your existing installment agreement as long as it doesn’t extend the agreement by more than 2 months.
- Meeting streamlined criteria for an installment agreement and you have not defaulted on an installment agreement in the 12 months prior to the current default.
You may also request a Collection Appeals Program (CAP) hearing to appeal your default or termination. However you choose to cure your default, you should contact the IRS and seek Boca Raton IRS payment help as soon as possible after receiving your notice and attempt to work out a solution.
Contact East Coast Tax Consulting for Boca Raton IRS Payment Help
If you have defaulted or think you may be in danger of default on your IRS installment agreement, you will want to take swift action to get back on track. For more information about IRS installment agreements and possible solutions when your agreement is in default, contact the tax advisors at East Coast Tax Consulting Group by filling out our online form or calling 866-550-7655.