When your installment plan defaults, the IRS can once again use enforced collection actions to try to collect your tax debt. This can include any of the following actions:
- Wage garnishments that take a portion of every paycheck you receive
- Bank accounts levies
- Filing of a Notice of Federal Tax Lien on against your property
- Retirement account levies
- Levies of Social Security Benefits payments
Protect your assets by taking the following steps to avoid an IRS installment plan default.
Don’t Monthly Payments
Missed payments are a major reason that taxpayers default on their installment agreements. This is one reason that the IRS prefers Direct Debit Installment Agreements so you don’t have to remember to send a check every month.
If you do miss a payment, you may have a limited amount of time to correct the default. If you need to renegotiate your agreement, contact a tax attorney for assistance.
File Tax Returns
If you are required to file a tax return and fail to do so, you’ve defaulted on one of your obligations under your installment agreement. The IRS can terminate your payment plan, even if you’ve been making all of your monthly payments.
File your tax returns on time or request an automatic extension if you can’t meet the deadline. If you expect to receive a refund, be aware that the IRS is generally going to seize your refund and apply it towards your outstanding balance.
Avoid New Unpaid Tax Obligations
While you’re making your monthly payments on your tax, you’re also probably incurring new tax obligations. You may be required to quarterly estimated tax payments, or you may owe a balance when you file your tax return.
A failure to pay these amounts on time and in-full can constitute a payment plan default. In some cases, you may be able to add these amounts to your existing plan and either increase your monthly payment or extend your repayment period.
Ideally, you should talk to a tax attorney and negotiate with the IRS before you fall behind on your current tax obligations. If you receive an IRS notice informing you that your plan is being terminated, you have 30 days to make a new deal before the IRS can start coming for your assets or wages.
The Gartzman Law Firm offers tax settlement help for both federal and state tax debt. Use our contact form to request a consultation with an Atlanta tax resolution attorney.