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.
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.
Important — act before this escalates.
What IRS Letter 1962 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.
What the IRS Can Do If You Don't Respond
- 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
What You Should Do Right Now
- 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
- 4
Continue filing all future tax returns on time — unfiled returns default the agreement
- 5
Pay any new tax balances promptly — a new balance can trigger default
- 6
Contact the IRS immediately if you need to change your bank account information
Resolution Options Available to You
Frequently Asked Questions About IRS Letter 1962
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 (currently ~7–8% per annum) and the reduced failure-to-pay penalty (0.25% per month while the agreement is active) continue to accrue. The agreement stops levies and liens from progressing, but the total balance grows until paid.
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.
Professional References
IRC: IRC §6159 — Agreements for Payment of Tax Liability in Installments; IRC §6601 — Interest
IRM: IRM 5.14.2 — Installment Agreements — Direct Debit
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