Background

The IRS allows taxpayers to pay back taxes over time through installment agreements, but those agreements require ongoing compliance. In my practice I’ve seen otherwise steady taxpayers lose protections after a single missed obligation. The IRS identifies certain “automatic termination triggers” so it can quickly return to enforced collection when an agreement’s terms aren’t met (IRS Payment Plans: Installment Agreements).

Common automatic termination triggers

  • Missed or late payments: Failing to make the scheduled installment payments is the most common trigger. Some agreements (like direct-debit plans) are monitored closely and even one missed automated withdrawal can start enforcement steps.
  • Failure to file required tax returns: If you don’t file future tax returns while an agreement is in place, the IRS may terminate the plan.
  • New or increased tax liabilities left unpaid: Additional assessments (e.g., an audit resulting in more tax) that aren’t added to the agreement or paid can prompt termination.
  • Providing false or misleading financial information: If the agreement was based on inaccurate data, the IRS can void the arrangement.
  • Bankruptcy or other court actions: Certain bankruptcy outcomes or court rulings can affect the IRS’s position and lead to termination.

(For official guidance, see the IRS payment plans page: https://www.irs.gov/payments/payment-plans-installment-agreements.)

What happens after termination

If the IRS terminates an installment agreement, the protections it provided end. Typical consequences include:

  • Resumption or initiation of enforced collection (levies, wage garnishments)
  • Filing or recommencement of federal tax liens
  • Continued accrual of interest and penalties on unpaid tax
  • Loss of eligibility for streamlined options until you resolve the default

How to avoid termination (practical steps)

  • Treat payments as a top priority: Set up direct debit when possible and keep backup funding to cover withdrawals. See our guide on how direct-debit plans work for practical setup tips: How Direct Debit Installment Agreements Work.
  • File returns on time: Even if you can’t pay a full balance, file timely returns to preserve the agreement.
  • Update the IRS if your finances change: If you can’t meet the payment amount, request a modification—our article on modifying agreements explains documentation and timing: Modifying an Existing Installment Agreement: When and How.
  • Keep thorough records: Save proof of payments, notices, and communications.
  • Call before you miss payments: Proactive contact can sometimes avoid automatic escalation.

If your agreement is terminated: next steps

  1. Review IRS notices carefully and note deadlines.
  2. Call the IRS or your assigned revenue officer to request reinstatement or a new agreement. Often you must bring payments current or present a reasonable-collection plan.
  3. Consider submitting a new application for an installment agreement (online or by phone) or an offer in compromise if you qualify.
  4. If you receive a levy or lien notice, you may request a Collection Due Process hearing to appeal (see IRS guidance on appeals).

If the agreement default left you with a larger collection action, our guide “How to Rebuild After an Installment Agreement Default” walks through rebuilding payment arrangements and negotiating with the IRS: How to Rebuild After an Installment Agreement Default.

Example (short)

A small-business owner kept a streamlined agreement but missed an automated bank withdrawal during a slow month. The missed payment triggered termination; the IRS resumed levy action until the taxpayer provided proof of payment and negotiated a revised plan.

Common mistakes to avoid

  • Assuming an agreement shields you from filing obligations
  • Treating missed payments as a minor administrative issue
  • Not communicating with the IRS when circumstances change

Quick FAQs

Q: Can I get an installment agreement reinstated after termination?
A: Often yes — if you bring payments current or negotiate a new plan. Specific steps depend on your case and the IRS office handling it.

Q: Will penalties and interest stop after termination?
A: No. Interest and penalties continue to accrue until the tax is paid or otherwise resolved.

Professional disclaimer

This article is educational and does not constitute legal or tax advice. For action on your account, consult a licensed tax professional or contact the IRS directly.

Authoritative sources

Internal resources

(Information checked against IRS guidance as of 2025.)