Tax Dictionary – Defaulted Installment Agreement
The Internal Revenue Service may propose termination of (place in default) installment agreements if taxpayers:
- fail to pay an installment payment when due under the terms of an agreement;
- fail to pay another tax liability at the time such liability is due; Note: This includes related TINs for the same taxpayer. Examples would be a sole proprietor and an IMF or a partnership and an IMF. Note: Affordable Care Act individual shared responsibility payment liabilities do not default an existing installment agreement.
- fail to provide an updated financial statement upon request;
- provided information prior to the date such agreement was entered into that was inaccurate or incomplete; or,
- fail to pay a modified payment amount based upon updated financial information.
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If you don’t meet the terms of your installment agreement because you miss a payment, don’t pay taxes that you owe, or don’t comply with IRS requests for information, the IRS will send you a notice that gives you 30 days to fix the problem. After that, the IRS will terminate your installment agreement.
Once the IRS has terminated your agreement, the IRS can begin enforced collection actions. The IRS will likely file a notice of federal tax lien and could potentially levy your wages and/or bank accounts.
If the IRS agrees to reinstate your agreement once it has been terminated, you’ll have to pay a reinstatement fee.
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