Key Takeaways
A missed installment agreement payment can put your plan into default. If the issue isn’t resolved, the IRS may eventually terminate the agreement and resume collection activity.
Take action as soon as you realize you’ve missed a payment. Review your IRS account and payment history and, if possible, make the missed payment as soon as possible.
If you can no longer afford your monthly payment, don’t simply stop paying. You may be able to modify your installment agreement or explore other tax relief options based on your financial circumstances.
What Happens If You Miss an IRS Installment Agreement Payment?
When the IRS approves an installment agreement, you agree to make your required payments on time and remain compliant with your other federal tax obligations. Missing a required payment can cause your agreement to go into default and potentially lead to its termination.
Here’s what you may face if you fall behind.
Your Installment Agreement May Default
The IRS requires you to pay at least your minimum monthly payment by its due date. Failing to make required payments can cause your installment agreement to default. Other compliance issues—such as failing to file required tax returns or failing to pay new federal tax liabilities—can also jeopardize an existing agreement.
A default doesn’t necessarily mean your agreement disappears the moment you miss a payment. It’s important, however, to correct the issue quickly and respond to any notices you receive from the IRS.
You May Receive a CP523 Notice
If your installment agreement defaults, the IRS may send Notice CP523, Notice of Intent to Terminate Your Installment Agreement.
CP523 is a warning that the IRS intends to terminate your payment plan. The notice explains why your agreement is in default and what you need to do to correct the problem. Generally, you should contact the IRS as soon as possible and no later than 30 days from the date of the notice.
Depending on your situation, you may be able to make the required payment or work with the IRS to reinstate your agreement. A reinstatement fee may apply.
Penalties and Interest Continue to Accrue
An installment agreement doesn’t stop interest and applicable penalties from accruing on your unpaid tax balance. These charges generally continue until the balance is paid in full.
Missing payments can make matters worse by keeping your balance outstanding longer. The sooner you get your installment agreement back on track, the sooner you can work toward eliminating these additional charges.
IRS Collections Could Resume
One of the major benefits of an active installment agreement is protection from most enforced IRS collection actions while you’re complying with the agreement.
If the IRS terminates your installment agreement, however, that protection may eventually end. The IRS could resume collection efforts, potentially including filing a Notice of Federal Tax Lien or issuing a levy against wages or bank accounts.
The IRS generally doesn’t take enforced collection action while an installment agreement is in effect, during certain periods when an agreement is being considered, for 30 days following rejection or termination, or while a timely appeal is being evaluated.
Immediate Steps to Take After Missing an IRS Payment
Start by confirming what happened.
Log in to your IRS Online Account and review your balance, payment history, and current payment plan information. Check whether the payment was actually missed or simply hasn’t posted to your account yet.
Keep in mind that IRS payments aren’t always reflected immediately. According to the IRS, recent payments may take time to be credited to your account.
If you’re enrolled in a Direct Debit Installment Agreement and expected the IRS to automatically withdraw your payment, also check your bank account. Confirm that there were sufficient funds available and that your banking information is correct.
Make a Manual Payment as Soon as Possible
If you confirm that your payment wasn’t made and you have the funds available, consider making the missed payment as soon as possible rather than waiting until your next scheduled payment.
The IRS provides several payment methods, including payments directly from a bank account through IRS Direct Pay or an IRS Online Account.
If you’ve already received a CP523 or another default notice, follow the instructions on that notice carefully. Even if you’ve already made the missing payment, the IRS recommends contacting them to ensure they have a record of your corrective action and determine whether your installment agreement needs to be reinstated.
What If You Can’t Make Your IRS Installment Agreement Payment?
Sometimes missing a payment isn’t an oversight. Your financial circumstances may have changed, and the monthly payment that was once affordable may no longer fit your budget.
If that’s the case, continuing to miss payments isn’t a long-term solution. Instead, consider these options.
Contact the IRS
If you know you can’t make your required payment, contact the IRS as soon as possible. Depending on your circumstances, the IRS may be able to work with you to restructure your installment agreement.
If you’ve already received a default notice, use the contact information provided on the notice.
Be prepared to explain why you can no longer afford your current payment. The IRS may request updated financial information to evaluate your ability to pay.
Modify Your Payment Plan
You may be able to modify an existing IRS installment agreement.
Depending on your eligibility, the IRS Online Payment Agreement tool allows taxpayers to make certain changes, including:
- Changing the monthly payment amount
- Changing the monthly payment due date
- Updating banking information for a Direct Debit Installment Agreement
- Converting an existing agreement to direct debit
- Reinstating an agreement after default
If you need a payment lower than the IRS will automatically accept, you may be required to provide additional financial information using forms such as Form 433-F or Form 433-H.
Keep in mind that modifying or reinstating an agreement may involve additional fees.
Explore Other Tax Relief Options
If your financial circumstances have changed significantly, simply reducing your monthly installment payment may not be enough.
Depending on your situation and eligibility, other IRS tax relief options may include an Offer in Compromise, which allows certain qualifying taxpayers to settle their tax debt for less than the full amount owed, or Currently Not Collectible (CNC) status, which can temporarily delay collection when paying the tax debt would create financial hardship.
The right option depends on factors such as your income, expenses, assets, tax balance, compliance history, and overall ability to pay.
Frequently Asked Questions
Need Help With a Missed IRS Installment Agreement Payment?
If you’ve missed an IRS installment agreement payment—or your monthly payments have become more than you can afford—waiting for the problem to resolve itself could put your payment plan at risk.
Tax Defense Network can help you understand your options and determine the best path forward based on your tax situation. Our experienced tax professionals can review your IRS debt, help address installment agreement issues, and explore available tax relief options that may help you get back on track.
Whether you need help reinstating or modifying a payment plan or want to determine whether another tax resolution option may be a better fit, contact Tax Defense Network today to learn how we can help.