What Happens If You Default on an IRS Installment Agreement?
Missed a Payment? Here’s What Happens Next
An IRS Installment Agreement is often a taxpayer’s best option for handling back taxes—until you miss a payment, skip a return, or fall behind on new tax obligations. When that happens, your agreement may be terminated, and IRS collections can come roaring back to life.
If you’ve received a default notice or missed a scheduled payment, you’re not out of options—but you must act quickly.
In this guide, we explain what triggers an IRS Installment Agreement default, what the IRS will do next, and how you can protect yourself and get back on track.
What Causes a Default?
Your IRS Installment Agreement can default for any of the following reasons:
- Missing a scheduled monthly payment
- Failing to file new tax returns on time
- Owing new taxes while the agreement is active
- Submitting a payment that bounces
- Failing to update your agreement after a modification
The IRS expects full compliance with current and future obligations during an agreement. Defaulting on any part can trigger immediate consequences.
Related: How to Set Up a Payment Plan with the IRS (Installment Agreement Guide)
What Happens After a Default?
Once the IRS flags your account as in default:
- You may receive Notice CP523, stating the agreement will be terminated
- The IRS may file or enforce a federal tax lien
- Collection actions such as IRS Wage Garnishment: What It Is and How to Stop It or How to Stop a Bank Levy in California may resume
- Interest and penalties will continue to grow
- You may lose eligibility for future streamlined agreements
In most cases, you’ll have 30 days from the notice date to fix the issue before the IRS acts.
Can You Reinstate Your Agreement?
Yes. In many cases, you can reinstate a defaulted agreement without starting over. You may need to:
- Pay the missed installment(s)
- Prove that your situation has changed
- Re-file IRS Form 9465 (Installment Agreement Request)
- Provide updated financial information
Related: How to Qualify for IRS Hardship Status (Currently Not Collectible)
When to Renegotiate vs. Reinstate
If your financial situation has worsened—or if you defaulted more than once—it may be better to negotiate a new agreement altogether. Options include:
- A new monthly payment based on updated income and expenses
- A Partial Pay agreement
- IRS Offer in Compromise – How to Settle for Less Than You Owe
- Transitioning into How to Qualify for IRS Hardship Status (Currently Not Collectible)
What If the IRS Starts Collections?
If you don’t resolve the default in time, the IRS can:
- Issue a wage garnishment
- Freeze your bank account
- Offset your refunds
- Place a lien on your property
Related: How to Stop a Bank Levy in California
How to Avoid Defaulting Again
To stay compliant and avoid future disruption:
- Automate payments using direct debit (DDIA)
- File all returns on time
- Pay new tax liabilities in full
- Contact the IRS early if you're struggling to pay
We Help Orange County Taxpayers Reinstate or Renegotiate IRS Agreements
At Boulanger CPA and Consulting PC, we help clients:
- Reinstate defaulted IRS agreements
- Stop IRS collections in their tracks
- Qualify for more affordable tax resolutions
- Avoid the cycle of repeat default and enforcement
Call (657) 218-5700 or schedule online at www.orangecounty.cpa
We offer virtual consults and serve taxpayers throughout Orange County and California.
Frequently Asked Questions
How long do I have after a default to fix it?
Typically 30 days from the notice date, but it’s best to act as soon as you know you’ve missed a payment.
Can I modify my payment amount if I defaulted?
Yes. You can renegotiate your terms if your financials have changed.
Will the IRS automatically garnish wages after a default?
Not always—but if you don’t respond to notices, garnishments and levies are likely.
Can I qualify for an Offer in Compromise after a default?
Possibly. If your situation supports it, a properly structured offer may be accepted.
📣 About the Author
Marc Boulanger, CPA is the founder of Boulanger CPA and Consulting PC, a boutique tax resolution firm based in Orange County, California and trusted by high-income individuals and business owners across Southern California.
With over a decade of experience resolving high-stakes IRS and State tax matters, Marc brings strategic insight to complex cases involving wage garnishments, bank levies, unfiled returns, and six-figure tax debts. He is known for helping clients reduce or eliminate tax liabilities through expertly negotiated settlements and compliance plans.
Marc is a Certified Public Accountant licensed in California and Oklahoma and holds the designation of Certified Tax Representation Consultant. He is a member of the American Society of Tax Problem Solvers (ASTPS) — the national organization founded by the educators and practitioners who have trained thousands of CPAs, EAs, and tax attorneys in IRS representation strategy.
Every case is handled with discretion, proven methodology, and direct CPA-led representation — not call center scripts.
📍 Learn more at www.orangecounty.cpa or call (657) 218-5700.
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