Defaulting on IRS Installment Agreement: Consequences and Solutions
When you owe taxes to the IRS, one option to pay them off is through an installment agreement. This agreement allows you to make monthly payments over time, based on the amount you owe and your ability to pay. While this can be a helpful solution to managing tax debt, defaulting on an installment agreement can result in serious consequences.
Consequences of Defaulting on IRS Installment Agreement
1. Penalties and Interest
If you miss a payment on your installment agreement, the IRS will assess penalties and interest on the unpaid balance. These fees can add up quickly, making it even harder to pay off your tax debt.
2. Collection Action
When you default on your installment agreement, the IRS can take action to collect the unpaid balance, including garnishing your wages, levying your bank accounts, or placing a lien on your property.
3. Default Status
Defaulting on your installment agreement can also put you in a default status with the IRS. This means that you will not be eligible for any additional installment agreements, and the IRS may take further collection action to get the money owed.
Solutions to Defaulting on IRS Installment Agreement
1. Contact the IRS
If you are having trouble making your payments, it`s important to contact the IRS and let them know. They may be able to offer a different payment plan or adjust the terms of your current agreement to make it more manageable.
2. Seek Professional Help
If your financial situation has changed or you are struggling to make your installment payments, seeking help from a tax professional can be helpful. They can guide you through the process of renegotiating your agreement or exploring other options to resolve your tax debt.
3. Consider an Offer in Compromise
In some cases, the IRS may accept an Offer in Compromise, which allows you to settle your tax debt for less than the amount owed. However, this option can be difficult to qualify for and should only be pursued with the guidance of a tax professional.
Defaulting on an IRS installment agreement can have serious consequences, including penalties, interest, and collection action. However, there are solutions to help you manage your tax debt and avoid defaulting on your agreement. It`s important to stay in communication with the IRS and seek professional help when needed to navigate these difficult financial situations.