You can skip a payment, but the IRS will charge you for it
Yes, you can skip an IRS installment payment. The IRS will not when ready seize your assets or file a new lien. But skipping a payment triggers late fees and interest on the unpaid amount, and it can cause your entire agreement to fail — meaning the IRS can demand the full remaining balance at once and restart collection action against you.
The practical question is not whether you can skip it, but whether you should, and what the actual cost will be. A single missed payment is recoverable. A pattern of missed payments can collapse the agreement entirely.
Key Takeaways
- Skipping one payment triggers a failure-to-pay penalty (usually 0.5% of the unpaid amount per month) plus interest, but does not automatically terminate your installment agreement.
- Missing three or more payments in a row, or missing payments totaling more than 25% of your agreement amount, gives the IRS grounds to cancel the agreement and demand full payment when ready.
- If you know a payment is coming due and you cannot make it, contact the IRS before the due date to request a temporary pause or modification rather than straightforward missing it.
- The IRS can reinstate a failed agreement if you catch up on missed payments within a set window, but reinstatement is not automatic and requires you to initiate contact.
- Interest and penalties compound on the unpaid balance, so the longer a payment sits unpaid, the more you owe beyond the original tax debt.
What the IRS charges when you miss a payment
When you skip an installment payment, two separate charges accrue: the failure-to-pay penalty and interest.
The failure-to-pay penalty is 0.5% of the unpaid tax for each month or part of a month the payment is late. If you owe $5,000 and miss a $200 payment, the penalty is 0.5% of $200 per month until you pay it. Interest accrues daily on the unpaid balance at a rate set quarterly by the IRS (currently between 8% and 10% annually, depending on the quarter). Both charges stack on top of your original tax debt.
These charges are separate from any fees the IRS may charge to reinstate a failed agreement. If your agreement is cancelled and then reinstated, reinstatement itself may carry a fee (currently $225 for most payment plans, though this varies by plan type).
When the IRS will cancel your installment agreement
Missing one payment does not automatically cancel your agreement. The IRS has specific thresholds before it terminates the plan.
Your agreement fails if you miss three or more consecutive monthly payments, or if you miss payments that add up to more than 25% of your total agreement amount. For example, if your agreement is for $10,000 total, missing payments worth more than $2,500 triggers cancellation. The IRS also cancels agreements if you fail to pay a required lump sum on time, or if you miss a payment on a modified agreement after it has already been reinstated once.
When the IRS cancels your agreement, it sends you a notice (usually CP523 or CP524) stating that the agreement is terminated and demanding payment of the remaining balance. From that point, the IRS can resume collection action — wage garnishment, bank levies, or liens — without waiting for you to miss additional payments.
How to avoid cancellation if you cannot make a payment
The key is to contact the IRS before the payment is due, not after. If you call the IRS or log into your account on IRS.gov and request a temporary pause, the IRS can grant you a short-term deferment — usually 30 to 120 days — without triggering the failure-to-pay penalty or counting as a missed payment.
To request a deferment, call the IRS at the number on your installment agreement notice, or go to IRS.gov and use the Online Account to request a payment extension. You will need your Social Security number, the tax year in question, and your agreement number. The IRS typically responds within a few days to a week.
If you cannot make payments for a longer period, you can also request a modification of your agreement — a lower monthly payment spread over a longer term. This does not erase what you owe, but it reduces the monthly burden. Modifications are handled the same way: by phone or through your IRS online account.
What happens if you miss a payment and do nothing
If you miss a payment and do not contact the IRS, the following timeline typically unfolds:
Within 30 days of the missed payment, the IRS sends a notice (CP523) warning that your agreement is at risk. This is a courtesy notice; it does not mean the agreement is cancelled yet. If you pay the missed amount within 30 days of receiving this notice, your agreement usually stays in place, though you will still owe the failure-to-pay penalty and interest on the late amount.
If you miss a second consecutive payment, the IRS sends another notice. If you miss a third consecutive payment, or if your missed payments exceed the 25% threshold, the IRS sends a final notice (CP524) stating that your agreement is terminated. At this point, the full remaining balance becomes due when ready, and the IRS can begin or resume collection action.
How to reinstate a failed agreement
If your agreement has been cancelled, you can request reinstatement by contacting the IRS directly. Call the number on your termination notice, or use your IRS online account to request reinstatement.
To reinstate, you will typically need to pay the missed payments in full, plus any penalties and interest that have accrued. The IRS may also require you to pay a reinstatement fee (currently $225 for most plans). Once you pay, the IRS will send you a new agreement notice with a revised payment schedule.
Reinstatement is not may provide. The IRS can refuse reinstatement if you have already had an agreement reinstated once before and then defaulted again, or if the IRS believes you are unable or unwilling to comply. However, most first-time reinstatement requests are granted if you pay the back amount and fees.
The real cost of skipping versus requesting a deferment
Comparing the two options shows why contacting the IRS first matters:
| Action | Penalty | Interest | Agreement Status | Timeline to Resolve |
|---|---|---|---|---|
| Skip one payment (no contact) | 0.5% per month on unpaid amount | Accrues daily on unpaid balance | At risk; cancellation after 3 missed or 25% threshold | 30+ days before cancellation notice |
| Request deferment before due date | None | Accrues on original tax debt only | Paused; agreement stays active | when ready; payment resumes after deferment ends |
| Request modification before due date | None | Accrues on original tax debt only | Active with new terms | when ready; lower payment begins next month |
A deferment costs you nothing in penalties. A skipped payment costs you 0.5% per month in penalties plus daily interest, and puts your agreement at risk of cancellation.
Frequently Asked Questions
What if I miss a payment by accident and do not realize it until weeks later?
Call the IRS as soon as you realize it. If you are still within the 30-day grace period after the missed payment, paying the back amount will usually keep your agreement intact. If you are past 30 days, paying when ready still helps — it stops the clock on additional penalties and shows the IRS you are trying to comply. The sooner you pay, the less interest accrues.
Can the IRS garnish my wages if I skip an installment payment?
Not when ready. Wage garnishment requires the IRS to issue a Notice of Levy, which typically happens only after your agreement is cancelled and you have failed to respond to collection notices. If you skip one payment and then catch up, garnishment is unlikely. If your agreement is cancelled and you do not reinstate it, garnishment becomes possible.
If my agreement is cancelled, do I have to pay the entire remaining balance at once?
Technically yes — the IRS can demand it. In practice, if you contact the IRS and request reinstatement, you can get back on a payment plan. You will need to pay the missed amounts and fees, but you do not have to come up with the entire remaining balance in one lump sum.
Does requesting a deferment hurt my credit score?
No. A deferment is between you and the IRS and does not appear on your credit report. Your credit is affected only if the IRS files a tax lien (a public record) or if you default on the agreement and the IRS pursues collection through other means.
What if I cannot afford to catch up on missed payments to reinstate my agreement?
Contact the IRS and explain your situation. You can request a new payment plan with a lower monthly amount, or ask about a temporary deferment while you gather the back payments. The IRS is more likely to work with you if you initiate contact than if you ignore notices.