First, the IRS does not authorize more than one collection agreement per taxpayer. For example, if you`re in a payout agreement for one year and you apply and owe the next year, the IRS won`t give you a separate payment plan for the new balance owing. You can only have one agreement with the IRS and this must cover all balances due. The IRS charges a one-time installment payment fee when you enter into an IRS instalment payment agreement. About 18% of all IRS payment plans fail each year. This equates to about 1 million taxpayers a year entering hot water because their IRS payment plan has been terminated for non-compliance. For those who do not comply with an IRS payment plan or a “remittance agreement,” there are several ways to return in good standing with the IRS and avoid forced collection activities (liens and levies). The failure of an IRS payment agreement does not mean the end of the world. Contacting the IRS as soon as possible can help you avoid a tax lien and get your account back in good condition. As with all tax matters, talking to a tax solutions expert can help you sort through all the options. Taxpayers who do not comply with the terms of the remittance agreement “will be notified in writing and will have 30 days to comply with the terms of the agreement before the agreement is terminated” (IRS.gov, “Part 5. Summary Process, Chapter 14. Instalment payment arrangements, section 11.
Default Payment Agreements, Terminated Agreements and Appeals Against: Proposed Terminations (Default) and Terminated Payment Agreements,” p. 21. 08.2013). What if you have a remittance agreement but your finances have changed and you can no longer make payments? Read on to find out what to do now. If you have successfully negotiated a installment payment agreement with the IRS, congratulations! You no longer need to constantly look over your shoulder for threatening letters, privileges, or visits from tax officials. The payment options available to you determine your specific tax situation. Payment options include full payment, short-term payment plan (payment in 120 days or less) or long-term payment plan (installment payment) (payment in more than 120 days). If you`re not trying to get out of your payout contract, but you know you won`t be able to make payments for a while, you may still be able to get a few months off.
A taxpayer whose remittance agreement is monitored by the IDRS receives Notice CP 523, Default Remittance Agreement – Notice of Intent to Collect. A failed instalment payment agreement may be reinstated without the manager`s approval if it is determined that the agreement “has been terminated due to additional liability and if the addition of this new liability does not result in more than two additional monthly payments and the agreement does not exceed the expiry date of the Collection Act (CSDE)” (“Section 11. Default Payment Agreements, Terminated Agreements and Appeals” vs. Proposed Terminations (Defaults) and Terminated Instalment Payment Agreements”). When applying for an irs instalment payment contract, the IRS usually automatically determines that you are a low-income taxpayer and can waive or reduce your application fee. If the IRS has not registered you as a low-income taxpayer, you can complete Form 13844, the Application for Reduced User Fees for Instalment Payment Agreements. But just because your payout contract has a pending default doesn`t mean the IRS can immediately increase your salary or bank account. You have options – and protections – when the norm occurs.
Before you apply for an IRS installment contract, your tax returns and payment claims must be up to date. You must have submitted all your tax returns. Approval is based on the amount you owe. If you owe less than $10,000, approval is usually automatic. A payment plan is an agreement with the IRS to pay the taxes you owe within an extended period of time. You should apply for a payment plan if you believe you can pay your taxes in full within the extended period. If you are eligible for a short-term payment plan, you will not be liable for a user fee. Failure to pay your taxes when they are due may result in the filing of a federal tax lien notice and/or IRS levy action. See Publication 594, The IRS Collection Process PDF.
If you believe you meet the requirements for low-income taxpayer status, but the IRS has not identified you as a low-income taxpayer, please refer to Form 13844: Application for Reduced User Fees for Instalment Agreements PDF for Orientation. .