Defaulting on a IRS or NYS Tax Installment Agreement

Defaulting on a IRS or NYS Tax Installment Agreement

Many of our clients that owe the IRS or NYS for unpaid back taxes had us create tax installment agreements which are paid monthly to satisfy the tax debt. The terms of the installment agreement require that the taxpayer stay in compliance by paying all taxes owed on time, and filing all tax returns on time, and not incurring a new unpaid tax liability.

As sometimes happens in tough economic times, a taxpayer cannot afford the payment plan and stops making the monthly payments. Both the IRS and NYS call this defaulting the tax installment payment agreement. If you find yourself in this predicament, it is best to be proactive and have your tax counsel contact the IRS or NYS before the actual default of the missed payment to work out an alternate payment agreement. In the cases where you just need to miss one payment, normally the IRS will overlook the default. If it a situation of a new tax liability, normally a new tax payment plan will need to be established, but it is much easier to establish a new payment plan where no technical default has occurred yet.

Therefore, by disclosing the default before it actually occurs, the IRS and NYS Tax Department will be more cooperative and work with you better. While this seems like common sense observation, most people in this situation are embarrassed by the whole situation and ignore it. It then becomes much worse than what it needed to be since they are now at risk of harsh collection activities when that could have been avoided by quick action

By: Timothy S. Hart