What Happens If You Fall Behind On Your IRS Installment Payments?

You failed to pay your taxes on time but were fortunate enough to score an installment agreement. Now, however, you’re also struggling to keep up with your payment plan. Unfortunately, the IRS might not be so forgiving this time. Below, we highlight a few of the best-case and worst-case scenarios you can expect to face if you fail to get caught up with your IRS installment payments:

Best-Case Scenario: Fees And a Revised Payment Plan

If you’re lucky, you can revise or reinstate your payment plan to ensure your ability to pay in the future. You may still be hit with fines or fees, but at least you can take solace in knowing that future payments will be somewhat manageable. The sooner you get in touch with the IRS after missing a payment, the better your chances of securing a favorable reinstatement.

Worst-Case Scenario: Defaulting and Facing Collection Action

If you fail to keep up with payments or at least revise your plan, you could be accused of defaulting on your agreement. The IRS may issue Notice CP523, officially verifying that your account is in default and that aggressive action may be taken if you do not pay up before the highlighted termination date.

If you don’t respond to Notice CP523, the IRS may initiate collection action. Methods vary depending on your financial situation, but you could face a federal tax lien or the seizure of funds from your bank account. If you believe the IRS has issued your default notice in error, it might be possible to seek a hearing via the IRS Office of Appeals.

Did you fall behind on your installment plan? It might not be too late to avoid the worst consequences outlined above. Call the Highland Tax Group at 720-398-6088 to determine your best options for obtaining a prompt resolution.