You've negotiated an installment agreement with the IRS but are now unable to stay on top of your monthly payments.
Maybe you've experienced:
Unexpected reduction in income
Lost your job
Sudden and necessary large expense
Increased medical expenses
You're not alone. And you do have options.
Need to miss one monthly payment?
The overall installment agreement still works for you, but a large expense has thrown a wrench in your monthly budget. The IRS actually understands and will allow you to miss one monthly payment per year. The Internal Revenue Service is normally accommodating as long as the grace periods are not abused. Of course, interest and penalties may continue to be added to your tax balance.
If you know that you will need to miss a payment, call the IRS at 1-800-829-1040 and request a one-month missed payment. This should be done before missing the monthly payment. However, if you missed one payment on your installment agreement and haven't made the phone call yet, it is important to contact the IRS before you miss a second payment. Otherwise, the IRS will send you a CP523 Notice of Intent to Terminate your Installment Agreement.
Need to miss more than one payment?
Again, the overall installment agreement still works for you. However, due to a reasonable, unexpected, or emergency financial need, your finances are tied up for the next two months. If this is the case, the IRS may still be understanding and grant you another missed payment.
Call the IRS before the payments are missed and request the additional missed monthly payment. The IRS might require you to submit documentation to prove the financial hardship, such as a receipt for a medical expense or car repair bill.
You can no longer afford your current installment agreement
If your long-term financial situation has changed and you can no longer afford your original installment agreement, you may be able to negotiate a new solution with the IRS. Call the IRS and inform them of your updated financial situation.
Be prepared to disclose your finances through a Collection Information Statement Form 433-F or Form 433-A depending on which IRS department is handling your account. The IRS may require proof showing your reduced income or increased living expenses, such as recent paystubs reflecting lower income, unemployment compensation, receipts for increased medical expenses, utility costs, etc... By providing necessary information proving your economic hardship, you may be able to:
Negotiate lower monthly payments
Obtain temporary currently not collectible status
Settle with an offer in compromise
Don't pay your monthly payments
If you can no longer afford your installment agreement, you can choose to not make any payments. Doing this will cause your installment agreement to default, and the IRS will mail you a CP523 Notice of Intent to Terminate your Installment Agreement. The CP523 is required by law to be sent to the taxpayer before the IRS can begin levying any accounts.
When you receive a CP523, take note of the following:
If no actions are taken within 30 days from the date of the notice, your installment agreement will officially be terminated. However, you can have the installment agreement reinstated if you call the IRS and take corrective action within 45 days from the date of the notice.
The IRS legally can not levy your bank accounts or wages for 60 days
You have the right to appeal the defaulted installment agreement (Form 9423 Collection Appeal Request) within 30 days from the date of the notice
If 30 days from the date of notice pass, you still have an additional 30 days to appeal the terminated installment agreement (Form 9423 Collection Appeal Request)
If you timely file an appeal within 60 days, the IRS can not levy you during the appeal process
If you aren't sure how to handle your current installment agreement with your new financial situation, allowing your installment agreement to default will give you extra time to figure things out.
Either way, there are options to get back on track with the IRS when you can no longer afford the monthly payments on your installment agreement. Staying proactive and communicating with the IRS is important for a quicker resolution.
If you need assistance, call our office at (267) 551-1465 or book a free consultation online. We can help you determine if retaining professional services makes sense for you.
Legal Disclaimer: The contents of this blog and all posts within it are for informational use only and are not intended to be legal advice. This blog is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice in any capacity. For specific advice regarding your own tax situation, consult with a licensed tax professional or tax attorney.
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