So, you’ve entered into an installment agreement with the IRS and now realize that you are unable to pay, what do you do? First off, don’t panic or become discouraged- the economy is extremely volatile and tough economic situations are understandable- even to the IRS. Take a moment to consider your situation, and how you arrived at your current state. Your wages may have recently been cut, or maybe you have been unemployed. Perhaps you have been negatively affected by an economic cycle, or you have taken ill. Whatever the case may be, it’s important to formulate and focus on your next actions rather than dwell on the past.
That being said, make sure to act quickly in informing the IRS of your situation and inability to pay. The worst thing that one can do when unable to taxes would be to do nothing, and unfortunately this seems to be the case time and time again. While it may be easier to ignore the problem and withhold payments for the time being, just one missed payment can begin a slew of unpleasant events with the IRS. It’s likely that the IRS will immediately detect the defaulted agreement and take action much quicker than you expect. And, once they begin, garnished wages, tax levies, and other forced collections, all become likely scenarios- causing you to owe even more money.
Sound appealing? We didn’t think so, either. And, even though contacting the IRS to let them know that you cannot make your payments on your tax installment agreement may not be the most enjoyable thing to do, it’ll sure save you a lot of unnecessary stress and trouble. Be sure to explain your situation carefully, capitalizing on any details you deem important. Also, prepare for the call before hand with proper dates and documents to back up your assertion. If your case appears valid, the IRS will likely understand- they are human, too. In most cases they’ll work with you to adjust the installment agreement- either reducing the payments or even deferring them for a later time.
However, the IRS may not be so understanding if they investigate and consider your monetary actions and inability to pay unwarranted. Be advised that the IRS will study each situation carefully; even requesting income and expense documents, in order to make sure that an individual is truly unable to pay because of ill circumstances rather than unwise monetary actions- like gambling in Vegas or making extravagant purchases. But, even if this is this case, contact the IRS anyway, because defaulting on a tax installment agreement with no explanation can yield far worse consequences, as previously discussed.