The IRS defines a breach of an installment agreement as the provision of inaccurate or incomplete information, or the failure to comply with the required terms of the agreement. In this case, the IRS may propose the termination of the installment agreement and terminated installment agreements. For other types of installment agreements, shown below, the IRS will continue to owe payments from banks and employers during the suspension period. For example, if you have an installment agreement for one year and you file a return and owe the following year, the IRS will not give you a separate payment plan for the new balance of the return you owe.
An unfulfilled installment agreement may be reinstated without manager approval if it is determined that the agreement was terminated “due to additional liability” and if the addition of that new liability will not result in more than two additional monthly payments and the agreement will not extend beyond the Expiration Date of the collection law (CSED) (“Section 11”). However, if a taxpayer is late in payments or stops paying altogether, the IRS can cancel the installment agreement and declare the taxpayer in arrears. Know that the TAS is open to virtually serving taxpayers who are in difficult situations or who are dealing with IRS tax problems that they have not been able to resolve directly with the IRS. Taxpayers who are currently unable to comply with the terms of an installment agreement, including an installment agreement with direct debit, can suspend payments during this period if they prefer.
However, many IRS sites are closed or have low capacity, so how can you stop payments without calling the IRS? In some cases, you may be able to provide limited financial information over the phone (usually employer and bank information) if you can pay under the simplified terms of the installment agreement. However, the IRS has the discretionary power to request new financial information based on your circumstances to reinstate the agreement. If a taxpayer is not in good standing with the IRS within 90 days, they may face forced collection from the IRS. There are solutions for the pending termination of your installment agreement, including the options offered by the IRS to allow for resolution without renegotiating a new agreement and the right to appeal any non-compliance to the IRS Office of Appeals.
Within the next 30 days after the CP523 notification, you can reinstate the installment agreement to avoid IRS levies. I have helped clients resolve their issues with the installment agreement and prevented the IRS from terminating the agreement. A taxpayer whose installment agreement is overseen by IDRS will receive Notice CP 523, Late Installment Agreement: Notice of Intent to Collect. If the IRS believes that you are not taking your installment payment seriously; if, after the fact, it discovers that you submitted erroneous information on your application or simply stop paying, you will be considered to have been in default.
