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What happens if you do not comply with the terms of an Installment Agreement with the IRS? What causes you to be in default?
A taxpayer will default on his or her installment agreement by doing any of the following:
• Incurring a new tax debt by filing a tax return with a balance due
• Failing to file a tax return timely and incurring a late filing penalty
• Failing to make their installment payments as agreed
If you default on your installment agreement, you will receive Notice CP523H. This letter is issued when the IRS intends to terminate your installment agreement. If you get this notice, it is in your best interest to contact the IRS immediately and deal with it. In addition to canceling your installment agreement, this letter also includes a Notice and Intent to Levy which means, if you do not act, the IRS can begin to levy (seize) your assets.
If you don’t pay the amount due by the date listed on the notice, the IRS can also levy your state tax refund. If you still have an outstanding balance after they levy your state refund, they may send you a notice giving you the right to a hearing before the IRS Office of Appeals, if you have not already received one. At that time, they can levy your other property or rights to property, which includes:
● Wages
● Real estate commissions, and other income
● Bank accounts
● Business assets
● Personal assets (including your car and home)
● Social security benefits
The taxpayer must either pay the balance due in full, request an Appeal under the Collection Appeal Process (see IRS Form 9423), or contact collections to begin renegotiating for a new installment agreement. If the IRS reinstates your installment agreement, you may have to pay a fee. If you choose to Appeal, you have 30 days to send in the Form 9423.
If you don’t pay the amount due immediately or call to make payment arrangements, the IRS can also file a Notice of Federal Tax Lien on your property, if they haven’t already done so. If a lien is in place, it may be difficult to sell or borrow against your property. A tax lien will also appear on your credit report – which may harm your credit rating – and your creditors will be publicly notified that the IRS has priority to seize your property.
At Tax Debt Resolution Services of Winchester VA, our mission is to help you eliminate your IRS issues and the stress the IRS has created in your life and help you get back to doing what you do best! We help our clients in Winchester VA, Strasburg VA, Martinsburg WV, and Charles Town WV to resolve their tax debts! If you need assistance please feel free to contact me at 540-662-4432 or brianbarto@libertytax.com.