With the IRS shutdown, it may feel like no one is keeping tabs on your IRS payments. Your IRS payments are a financial hardship. Skipping payments during the shutdown should be fine, right? You’ll make the payments later; it’s not like you’re dodging your obligations. While this thought process might seem logical, the IRS won’t interpret pausing your payments the same way – even if you’ve also been furloughed during the shutdown. Stopping your payments during a government shutdown can have serious long-term consequences. Let’s just go into them.
Interest and Penalties Still Accrue
The IRS’s limited operations, unfortunately, don’t mean that interest and penalties on your tax debt will be on hold. Interest and penalties will still apply, even when IRS staff are not actively processing your payments. Government shutdowns don’t last forever, but we might be in for a historic one, making it all the more tempting to pause your payments. Once IRS operations resume, any missed payments will be flagged immediately, and interest and penalties will be applied to your account balance.
Skipping Payments Impacts Your Payment Plan
Your IRS payment plan came with strict repayment terms. Sticking to your schedule is crucial not only to prevent accrued interest and new penalties, but also to avoid late fees. A missed payment can threaten your payment plan altogether. Remember, your payment plan is a legally binding contract between you and the IRS; that contract isn’t contingent on IRS operations.
As soon as the IRS reopens, you could receive notice that violation of your plan terms by missing a payment means that your payment plan is cancelled. After you’ve worked so hard to get a payment plan financially feasible for you, it would be a shame to lose it.
What Happens if I’m Midway Through the Payment Plan Application Process?
If you’re presently going through the offer in compromise (OIC) or other payment plan process, you should not stop making payments. While processing your application may be on pause, your tax debt isn’t. If you fail to make payments during the shutdown, it can constitute noncompliance, making the IRS less likely to work with you to set up a payment plan when it starts processing applications again.
At Highland Tax Group, we know that the shutdown can be confusing for those navigating their tax debt. Whether you’re a federal worker who has been furloughed or lost your job, or are in another role that is impacted indirectly by the current situation, you may be facing difficulty making your IRS payments. The qualified professionals at Highland Tax Group are here to help you develop a strategy to keep your costs on track during this shutdown.