Missing IRS installment payments can lead to serious consequences. If you are unable to make your payments on time, it is important to know what can happen. In this blog post, we will outline the possible consequences of missing an IRS installment payment and what you can do to avoid them.
What is an IRS installment payment?
An IRS installment payment is a payment plan offered by the IRS to taxpayers who are unable to pay their tax debt in full. This payment plan allows taxpayers to make monthly payments toward their outstanding tax liability over a period of time.
To qualify for an installment payment plan, taxpayers must owe less than $50,000 in combined tax, penalties, and interest and must be current with all tax filings.
Consequences of Missing An IRS Installment Payment
Consequences of missing an IRS installment payment can include:
Interest and penalties will accrue on the unpaid balance
This can add up quickly and make your debt even more difficult to manage
A tax lien on your property
Garnishing your wages to collect the outstanding debt
This can negatively affect your credit score and make it more difficult to obtain loans or credit in the future
It's important to note that missing an installment payment can also result in the termination of your installment agreement, meaning you will be required to pay the entire balance in full immediately.
What to Do If You Miss a Payment
If you miss an IRS installment payment, don't panic. You should:
Ignoring it will only make the situation worse. You can still catch up on your payments and avoid penalties and interest charges. The IRS will send you a notice to let you know that you have missed a payment.
The notice will include instructions on how to proceed. You will have the option to pay the missed payment immediately or set up a new payment plan.
Explore other payment options
If you are struggling to keep up with your IRS installment payments, it is important to know that you have other payment options available. One of these options is called an Offer in Compromise. An Offer in Compromise allows you to settle your tax debt for less than the full amount you owe.
However, it is important to note that not everyone is eligible for this option. To qualify, you must be able to demonstrate that you are unable to pay your full tax debt, even through an installment agreement.
Tips to Avoid Missing An IRS Installment Payment
To help you avoid missing a payment, there are a few steps you can take.
1. Consider setting up automatic payments or reminders through your bank or the IRS.
This will ensure that your payment is made on time, every time.
2. Second, adjust your budget to ensure that you have enough funds available for your payment each month.
This may require cutting back on discretionary expenses or finding ways to increase your income.
3. Finally, consider paying more than the minimum amount due each month.
By doing so, you can pay off your balance faster and reduce the amount of interest charges you incur over time.
When to Seek Professional Help
If you've explored all your options and still can't afford to pay your taxes, seeking professional help with an IRS payment plan may be your best course of action.
A tax professional or certified public accountant can assess your financial situation and help you determine which payment plan is right for you. They may also be able to negotiate with the IRS on your behalf to reduce penalties and interest charges.
If you are struggling to make your payments, it is important to take action before it's too late. By understanding the potential consequences, knowing what to do if you miss a payment, and taking proactive steps to avoid missing payments in the future, you can successfully manage your IRS installment agreement.