If you have defaulted on your IRS installment agreement, you’re not alone. Many taxpayers face financial challenges that make it difficult to keep up with their tax payments. However, defaulting on an installment agreement can have serious consequences. So, what should you do if you find yourself in this situation?
First, let`s understand what an IRS installment agreement is. An installment agreement is a payment plan that allows you to pay your tax debt over time. This payment plan is a viable alternative for taxpayers who cannot pay their tax debt in full. Once you sign up for an installment agreement, you must make payments every month until you have paid the entire balance.
If you default on your installment agreement, the IRS has the right to take action against you. Here are some of the consequences you may face:
1. Penalties and Interest: If you default on your installment agreement, you may face additional penalties and interest charges. These charges will increase your overall tax debt.
2. Collection Action: The IRS may take collection action against you if you default on your installment agreement. This could include wage garnishment, bank levies, or a tax lien.
3. Defaulted Agreement: If you have already defaulted on a payment plan, you may not be eligible for another installment agreement in the future.
So, what should you do if you default on your installment agreement?
1. Contact the IRS: The first step is to contact the IRS and explain your situation. They may be willing to work with you to create a new payment plan or adjust your existing plan.
2. Pay the Balance: If possible, try to pay the balance of your tax debt in full. This will stop the collection action and reduce the amount of penalties and interest charges.
3. Seek Help: If you’re struggling to pay your tax debt, seek help from a tax professional or financial advisor. They can help you understand your options and negotiate with the IRS on your behalf.
In conclusion, defaulting on an IRS installment agreement can have serious consequences. If you find yourself in this situation, it’s important to take action as soon as possible. Contact the IRS, pay the balance if possible, and seek professional help. By taking these steps, you can resolve your tax debt and avoid further financial hardship.