Important Advice When You Default on an IRS Payment Plan

September 26, 2022
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Every year, many taxpayers in Dallas find themselves in a situation where they owe the IRS more in taxes than they are able to pay currently. The Internal Revenue Service (IRS) has provisions that are especially designed to help such taxpayers dig themselves out of the hole. This is in the form of a range of payment plans in which defaulting taxpayers can enroll to get IRS debt relief. The IRS has the right to terminate the installment agreement and declare a taxpayer to be in default if they fall behind on payments or cease paying altogether. When faced with such a scenario, the best way forward is to hire an experienced IRS tax attorney in Fort Worth, TX. In this blog, we are going to discuss how you can proceed after defaulting on an IRS payment plan.

Related Blog Post: Does a Payment Plan Stop Penalties and Interest?

When is a taxpayer in default?

Defaulting taxpayers are either late with their payments or unable to make them at all. If you have a genuine justification behind missed payments, and it doesn’t become a habit, the IRS may overlook one or two such instances, otherwise you will be regarded as being in default. This generally happens if the IRS thinks that you are not taking your installment plan seriously, or when you simply stop making payments altogether. Here are the top four reasons why taxpayers may be considered to be in default:

Missed payments for an IRS payment plan
Filing another return and failing to pay the tax liability in time, or owing a balance from another return and failing to pay it in full.
You don’t provide the IRS with updated financial information despite being asked to do so by the government agency.
Not paying a modified payment amount that you previously agreed to with the IRS.

Does the IRS allow multiple collection arrangements for a single taxpayer?

In a majority of cases, the IRS does not allow more than one collection arrangement for a taxpayer. Suppose you have been enrolled in an installment agreement for one year. If you file and owe that amount during the next year, the IRS will not provide you with a separate payment plan on the new return’s balance. Simply put, taxpayers can only have a single agreement plan with the IRS, which must cover all outstanding amounts.

The timeline after defaulting on a payment plan

Here is what the timeline looks like after defaulting on an IRS payment plan:

IRS issues default notice (CP523 OR Letter 2975)
You can reinstate the agreement or request a new one to avoid levies
Your existing installment agreement is re-established, or the IRS sets up a new agreement (Depends entirely on IRS)
If a new agreement is not introduced, the agency might seek enforced collection of the dues 90 days after the CP523 notice was sent.

It is always best to consult an IRS tax attorney in Fort Worth, Texas when looking to enroll in a payment plan or in default on your current IRS payment plan.

Final word

It is quite easy to get proven tax help in Fort Worth. An experienced IRS tax attorney in Fort Worth, TX, can help you explore the different tax debt relief options to find one that suit you the best. When looking for a reliable Fort Worth tax lawyer or attorney, look no further than the Law Offices of Nick Nemeth. Your search for a ‘tax lawyer near me’ ends here. Our team of experienced IRS tax lawyer in Dallas, TX, can help resolve all your IRS tax-related problems. Contact us today for a confidential no-obligation consultation at (972) 426-2553 or fill out our contact form, and we’ll get back to you as soon as possible.

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19:13 02 May 24

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06:55 19 Jan 24

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20:17 13 Jan 24

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20:53 21 Dec 23

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03:44 14 Nov 22

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When is a taxpayer in default?

Does the IRS allow multiple collection arrangements for a single taxpayer?

The timeline after defaulting on a payment plan

Final word

What Our Clients Have to Say

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