IRS Payment Plan Missed Payment

What to Expect If You Miss the Monthly Payment on Your IRS Installment Agreement

If you miss a payment on your IRS installment agreement, the agency will generally give you a chance to make up the payment and get back on track. However, if you miss multiple payments or don’t cure the default, the IRS can terminate your payment plan and try to collect the debt involuntarily through garnishments or asset seizures. 

To protect yourself, you need to be proactive – if you can no longer afford your existing payment plan, you need to make other arrangements with the IRS. To get help or talk about options, contact us at The W Tax Group today. We specialize in helping individuals and businesses deal with tax problems.

What Happens If You Miss a Monthly Payment to the IRS?

If you miss a monthly payment, the IRS will typically send you Notice CP523. This notice shows the minimum payment you must make to avoid having your installment agreement terminated. As long as you make the payment by the deadline, the IRS will not terminate your installment agreement. 

However, the situation may be different if you have a history of missing payments. If you’ve missed multiple payments throughout the year, the IRS may just terminate your agreement and demand payment in full. 

What If the IRS Didn’t Take My Payment Out of My Account?

If you pay through direct debit and the IRS didn’t take your payment, you should make a manual payment to avoid going into default. You can pay through the IRS’s online account or mail a payment. Then, contact the agency to see why they didn’t take the payment and to ensure you’re set up correctly for next month. 

Some reasons that the agency may not have withdrawn the payment include the following:

• Insufficient funds in your bank account.
• Incorrect bank details.
• Closed your account.
• Technical errors from the IRS.

If this was your first monthly payment, double-check your routing and account numbers to make sure they are correct. If you know that’s not the issue, see if your bank returned the payment without your knowledge, or contact the IRS to see if there was another issue. 

What to Do If You Miss a Payment

Do the following if you forget to make your monthly payment or miss your payment for any other reason:

1. Verify the missed payment. If you’re unsure whether or not you missed the payment, you can check your payment history through your online account or by calling the IRS.
2. Make up the payment. To avoid interest and penalties and to keep your payment plan active, make the missing payment manually. You can pay online with your bank account or a credit/debit card.
3.  Check your payment method. Check your payment details if you pay through direct debit. If you mail in payments, make sure you’re using the correct address. 

What If I Can No Longer Afford My Payment Plan?

If you can’t afford your monthly payments, consider one of the following options:

• Modify your existing agreement – You can reduce your monthly payments as long as you pay at least $25 per month and the payments are enough to pay off the balance within six years.
• Provide a financial disclosure to get a new payment plan – If you need more than six years to pay, you may be able to extend your current payment plan, but that typically requires you to submit a collection information statement with details about your finances. 
• Request an offer in compromise – If you can come up with a lump sum, the IRS may let you settle for less than you owe. You may also be able to make payments on a settlement over 24 months.
• Consider a partial payment installment agreement – This option is for taxpayers who cannot afford the minimum payment on an installment agreement. The IRS lets you make low monthly payments based on your budget, and then, when the debt expires, the remaining amount is waived.
• Look into currently not collectible status – If you cannot afford to pay anything, the IRS will mark your account as CNC and stop all collection actions until your finances improve. If the debt expires while you’re on CNC status, you won’t have to pay anything.

In all cases, it’s critical to communicate with the IRS promptly. If the agency doesn’t hear from you, they can terminate your payment plan. Then, they may issue a tax lien, take away your passport, garnish your wages, or take other collection actions that vary based on the situation.

How to Reinstate a Defaulted IRS Installment Agreement

You can request to reinstate your payment plan online or over the phone, but you may need to pay a fee. If you reinstate it online, you generally only need to pay a $10 fee, but the fee is higher if you reinstate it over the phone or in person. 

If the IRS has terminated your installment agreement, you will generally need to apply for a new payment plan. As of 2024, the set-up fees range from $22 to $178 but may be waived for qualifying low-income taxpayers. If you apply for a payment plan after having your existing plan terminated, the IRS may require you to complete a financial disclosure. 

How to Avoid Missing Payments in the Future

Missing a single monthly payment can snowball into a very uncomfortable situation. To stay on top of your payment plan, consider these tips:

• Choose the lowest monthly payment possible – Then, you don’t have to worry about coming up with a big payment every month, but you can pay extra on the months when you can afford extra.
• Set up direct debits on the most convenient day for you – The IRS lets you choose any payment date from the 1st the the 28th. So make sure you pick the date when you’re most likely to have the funds on hand.
• Create a reminder for mailing payments – If you mail your monthly payments, set an alarm to help you remember. 
• Set up an IRS online account – An online account makes it easy to make payments manually if you forget to mail your payment. You can also pay with a credit/debit card online for a small fee. 
• Budget carefully for your payments – Make sure that you have room in your monthly budget for these IRS payments. Adjust your expenses as needed.

FAQs on Missing IRS Payments

If I miss an IRS payment, will the IRS reinstate my installment agreement?

If you pay the past due amount shown on your CP523 notice by the due date, the IRS will generally reinstate your installment agreement.

What happens if I have a missed IRS payment?

The IRS will put your payment plan into default and send you a notice telling you how to avoid termination. As long as you pay the past due amount by the deadline, you will be able to continue making payments. 

Can I skip an IRS installment payment?

If you skip a payment, your plan will go into default, and you will have a limited amount of time to address the situation. If you miss multiple payments, the IRs may terminate your payment plan and demand payment in full. 

What if I cannot pay my IRS installment agreement?

Then, you may want to look into an offer in compromise, a partial payment installment agreement, or currently not collectible status. The IRS has several options for taxpayers experiencing financial hardship. 

What if I miss a payment on my state tax payment plan?

All states have different tax collection rules. Missing a payment puts you at risk of losing your payment plan. If you can no longer afford your state payment plan, you should reach out to the state’s Department of Revenue or find a tax attorney with state-specific experience. 

Get Help From the W Tax Group

At the W Tax Group, we specialize in helping taxpayers deal with unpaid taxes and other complicated tax problems. If you’re worried about your payment plan going into default or need other help with your taxes, contact us today. We will customize a solution that’s designed for your unique tax problems.