Missing a payment on an IRS installment agreement is a default on your agreement. The IRS will usually send a CP523 Notice: Intent to Terminate Installment Agreement.
If you don’t pay by the deadline in the notice, the IRS will terminate your installment agreement. You will then need to pay your tax debt in full or the IRS may take further collections actions.
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This post is provided for general information only. Please confirm the details and circumstances of your unique situation with your tax accountant or other appropriate advisor before taking action.
Does a missed installment agreement payment impact your credit score?
Installment agreements are not reported on your credit report. Unlike a late credit card payment, a late installment agreement payment will not count against your credit score as a late payment.
Your credit score could go down if you default on your installment agreement and the IRS reports a tax lien on your credit report.
Does the IRS charge a late payment penalty on installment agreements?
There is no specific late fee for missing an installment agreement payment. However, interest and penalties continue to accrue based on your outstanding balance.
If the IRS terminates your installment agreement because of missed payments, you may have to pay a fee to reinstate it.
What should you do if you miss an installment agreement payment?
If you miss an installment agreement payment, you should make the payment as soon as possible. The best way to do this is by using direct pay on the IRS website rather than by mailing a check. This will ensure the IRS receives your payment as soon as possible.
If you make your payment fast enough, the IRS may not take any additional action and leave you on your installment agreement. If they’ve already started the process to terminate it, having already made your payment will make it more likely they won’t terminate it or will reinstate it.
What if you can’t afford your installment agreement payments?
If your financial situation has changed, you may have other options. This could include temporarily stopping collections through currently not collectible status or settling the debt with an offer in compromise.
If you’re a business, review your financial accounting reports to find ways to improve your cash flow.