IRS Letter 1962: Your Direct Debit Installment Agreement Has Been Established

Your IRS payment plan is active — here's what you need to know to keep it.

Your deadline

Make every payment on time — any default triggers CP523

Missing a single direct debit payment can put your installment agreement in default. Review your bank account and debit terms immediately.

How soon to act: Standard

What this notice means

Letter 1962 confirms that the IRS has established a direct debit installment agreement (DDIA) on your account. Unlike a regular installment agreement, a DDIA automatically drafts your monthly payment directly from your bank account on the scheduled date — reducing the risk of a missed payment.

The DDIA is generally more favorable to taxpayers than a standard installment agreement — the user fee is lower ($31 vs. $149 for a new agreement online), and the IRS is less likely to default the agreement if payments are made automatically. Interest and failure-to-pay penalties continue to accrue, but at a reduced rate while the agreement is active.

The agreement will remain in good standing as long as every direct debit payment is made, you continue filing all future returns on time, and you pay any future balances when due. Violating any of these conditions results in CP523 — notice of installment agreement default.

How it works

1
Confirm your bank account number and routing number are correct in the letter
2
Note the payment amount, due date, and bank debit schedule
3
Ensure sufficient funds are in your account on each payment date

Other options

Continue filing all future tax returns on time — unfiled returns default the agreement
Pay any new tax balances promptly — a new balance can trigger default
Contact the IRS immediately if you need to change your bank account information

If you do nothing

Continue the agreement in good standing as long as payments are made and returns filed
Issue CP523 and terminate the agreement if you miss a payment or incur a new balance
Resume full collection (liens, levies) upon termination of the agreement

Which sounds like you?

Installment Agreement Support

Maintain your agreement and understand your rights if you face a default risk

Tax Preparation

Stay current on filing obligations to protect your installment agreement

Common questions

What happens if my bank rejects a direct debit payment?

A returned payment can trigger a default notice (CP523). Contact the IRS immediately if a payment is returned — you may have a short window to cure the default before the agreement terminates.

Can I change the payment amount on my direct debit installment agreement?

Possibly — if your financial situation has changed significantly, you can request a modification. The IRS will require updated financial information and may adjust the terms. Changes take time to process, so act early.

Does my installment agreement stop interest and penalties?

No. Interest and applicable penalties generally continue until payment. Levy restrictions can apply while an agreement is pending or active, but an agreement does not automatically release an existing levy or prevent a lien filing.

How long will my DDIA last?

The agreement runs until the balance is fully paid. For most streamlined agreements (balances under $50,000), the payment period is up to 72 months. Interest and penalty accrual extend the effective payoff timeline.