Background

The IRS began offering installment agreements to let taxpayers repay liabilities over time; electronic and automatic payment options were added to reduce defaults and administrative burden. Over the last decade, more taxpayers have chosen automatic debits because they lower the chance of missed payments and simplify compliance (IRS — Online Payment Agreement).

How automatic payments work (step-by-step)

  1. Choose or obtain an installment agreement: You request an agreement using the IRS Online Payment Agreement (OPA) tool, by phone, or by submitting Form 9465 (Request for Installment Agreement).
  2. Authorize automatic payments: During setup you can authorize a Direct Debit Installment Agreement (DDIA) or other scheduled electronic withdrawal. You must provide bank routing and account numbers and choose a withdrawal date.
  3. Debits occur on scheduled dates: The IRS (or its processor) withdraws the agreed amount on the date you selected — typically monthly — until the balance is paid in full.
  4. Monitor and reconcile: Payments show on your bank statement and your IRS online account. Interest and penalties on the unpaid balance continue to accrue until the liability is fully paid (IRS — Interest and Penalties).

Eligibility and requirements

  • Many streamlined installment agreements allow automatic payment as a required condition; thresholds and program rules change, so check the current limits on IRS.gov.
  • The IRS typically requires a valid U.S. bank account for direct debit authorization.
  • A setup or user fee may apply depending on how you apply and whether you qualify for a reduced fee or low-income waiver.

Pros and cons

Pros

  • Reduces the risk of missed payments and default.
  • No need to remember manual monthly payments.
  • Often required for some low-cost streamlined agreements (helps you qualify).

Cons

  • You remain responsible for ensuring sufficient funds; overdrafts can cause bank fees and IRS default notices.
  • Interest and penalties continue until full payment.
  • You must contact the IRS to change or cancel the agreement; changes can take time.

Practical setup tips (from experience)

  • Pick a withdrawal date right after paydays to lower overdraft risk. In my work helping clients, even shifting the debit by one week prevented most missed-payment problems.
  • Keep an emergency buffer in the linked bank account equal to at least one scheduled payment.
  • Enroll and confirm payments via your IRS online account; save confirmation numbers and copies of authorization.
  • If you expect a cash-flow interruption (job loss, seasonal income), contact the IRS ASAP to request a modification or temporary relief.

Common mistakes to avoid

  • Assuming enrollment relieves all responsibility. Always monitor bank and IRS accounts.
  • Forgetting to update bank information after switching accounts — this is a common cause of default.
  • Not accounting for continuing interest and penalties; automatic payments reduce principal faster only if amounts exceed monthly interest accrual.

When automatic payments can be required

For some streamlined and lower-cost agreements, the IRS may require direct debit as a condition of approval because it reduces risk and collection costs. Always verify current program rules on IRS.gov or via the Online Payment Agreement tool.

What happens if a payment fails

A failed automatic payment can trigger a notice and, if unresolved, cause the installment agreement to default. Default can restore collection actions (levies, offsets) and require you to re-negotiate terms. Contact the IRS immediately if a debit fails and arrange a replacement payment.

How to cancel or change automatic payments

You can request changes by contacting the IRS or through the Online Payment Agreement tool. Keep in mind processing times — stop or change requests won’t always prevent a debit already in transit. If you believe an unauthorized debit occurred, contact your bank to dispute the charge and also notify the IRS.

Related resources (FinHelp)

Authoritative sources

  • IRS — Online Payment Agreement (OPA) and payment plan information (IRS.gov).
  • IRS — Direct Debit Installment Agreement details and requirements (IRS.gov).

Professional disclaimer

This article is educational and does not replace individualized tax advice. For guidance that accounts for your full financial situation, consult a licensed tax professional or CPA.