You didn’t have enough money to pay your taxes in full when you filed last year.
So you were relieved to learn you could set up a monthly installment agreement
You requested a monthly pay plan for the remaining balance, and the IRS accepted it. So you began making payments every month and moved on with your life.
But then a few months later you got an IRS notice of “intent to terminate your installment agreement”!
How in the world does this happen?
There’s five silly - but sure-fire - ways to screw up an IRS Installment Agreement. Most taxpayers are completely unaware of how easy it is to default on their agreements.
If you default, you open the door for the IRS to take unwelcome enforcement action such as seizing property or levying your bank account.
So here’s some things to avoid so you don’t unknowingly jeopardize your agreement.
- Missing quarterly estimated tax payments. Realtors and other self-employed taxpayers are required to make payments to the IRS four times a year. But many just wait until tax time to make the payment, which technically terminates the agreement!
- Not having enough taxes withheld from your W-2 pay. Most realtors don’t get a W-2, unless they operate their business as an S corporation to save on taxes. (This can be a wise strategy for seasoned realtors with $75,000 or more in 1099 commissions annually). If your S corporation reports W-2 income, be sure you have enough federal taxes withheld during the year, so you don’t mess up your payment agreement
- Filing your tax return after the deadline. It’s easy to do because the tax deadline traditionally comes during the busiest season for real estate agents and brokers, who get behind on other things in life. But your installment agreement “Fine print“ requires that you stay current on your taxes (see number one and number two above) and that you file your returns timely. Not a week late. Not a month late. “I’m too busy“ is not a reasonable excuse as far as the IRS deadlines are concerned
- Paying your taxes after the due date. Let’s say you didn’t make any quarterly estimated payments, you efile your return on time, with a balance due, but don’t pay the balance due on this years taxes until a month after you file. You just defaulted the terms of your installment agreement covering the prior year taxes
- Missing monthly payments. (duh!). So far we have assumed you’ve made your monthly payments like clockwork. But in the real world agents miss payments. Miss one and you’re in trouble. Miss two and you’ve defaulted on your agreement. You really want call the IRS if your having a slow financial period to request that they tack a payment on at the end of the term. This is time to be proactive, and not hide in “procrastination mode“
Taxpayers need to know all the requirements to keep their installment agreements in tact. The agreements are hard to get sometimes, especially in agreement for an affordable monthly payment. So don’t do something that’s going to mess it up later
I specialize in helping Realtors get out of trouble (and stay out of trouble) with the IRS. If you need help or have questions regarding back taxes, unfiled returns, or how to settle for less than you owe, end your stress, and get a fresh start, please contact me at firstname.lastname@example.org
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