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What happens if I default on my installment agreement?

Getting a installment agreement can be a trying and costly experience. Once you've got one, you will keep it in good standing if:

  • You file all future tax returns on time. That includes extensions.

  • You pay all taxes when they are due. That means April 15; an extension doesn't matter. If there are penalties and interest have been added, they must be paid promptly.

  • No payments are refused by your bank.


If your installment agreement is defaulted, the IRS has the option to reinstate it upon request. If the default is not resolved, your case will become the responsibility of the IRS Collection Division. This is the part of the IRS that has the authority to levy (seize) your wages, retirement income (even Social Security) and bank and investment accounts. Such actions can be stopped or limited if you contact the IRS. The conditions for success depend on factors that will be determined by the IRS.

A significant effect of a lien is that your property cannot be sold or mortgaged unless the debt underlying the lien is paid off. There are circumstances under which the IRS can remove or reduce a lien.

There are rules that require the IRS to file liens. Some rules are based on the amount of the unpaid taxes. In other cases, liens will be filed when the taxes are not paid after:

Generally, liens last as long has the IRS has the right to collect the debt, which is 10 years from the date the tax is put on the books, referred to as the assessment date. Note that there are circumstances which extend the 10-year period, for example while an appeal, bankruptcy or Offer in Compromise is in process.

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