How the IRS payment plan process works
If you owe the IRS money and cannot pay it all at once, you can set up a payment plan — called an installment agreement — that lets you pay in monthly installments. The IRS offers several types of plans depending on how much you owe and your circumstances. You do not have to contact a representative to set one up; you can request one online, by phone, or by mail.
The IRS charges a setup fee and interest on the unpaid balance, so the total amount you pay will be more than what you originally owed. The setup fee ranges from $31 to $225 depending on which type of plan you choose and how you set it up. Interest accrues daily on any unpaid tax, penalties, and fees until the full balance is paid.
You must file your tax return even if you cannot pay. Setting up a payment plan does not stop penalties and interest from growing, but it does prevent the IRS from taking collection actions like wage garnishment or bank levies while you are making regular payments.
Key Takeaways
- The IRS offers short-term and long-term installment agreements, with setup fees ranging from $31 to $225 depending on the plan type and how you set it up.
- You can request a payment plan online through IRS.gov, by phone at 1-800-829-1040, or by mail using Form 9465, and the process takes a few days to a few weeks.
- Short-term plans cover balances under $100,000 and require payment within 180 days; long-term plans can stretch payments over several years for larger amounts.
- Interest and penalties continue to accrue on your unpaid balance, so paying faster reduces the total amount you owe.
- If your circumstances change, you can modify or terminate your agreement, but you must stay current on payments to keep the plan active.
Types of IRS payment plans and their limits
The short-term payment plan is for balances under $100,000. You have up to 180 days to pay, and there is no setup fee if you set it up online. This plan works best if you can pay off your debt within six months.
The long-term installment agreement is for any balance amount. You can spread payments over several years — the IRS will work with you to set a monthly payment amount based on what you can afford. The setup fee is $225 if you pay by check or money order, $31 if you set it up online or by phone, and $225 if you set it up by mail using Form 9465. If your income is below 250 percent of the federal poverty line, you may may have access to for a reduced setup fee of $31.
A may provide installment agreement is available if you owe $10,000 or less and can pay the full amount within three years. The setup fee is $31, and the IRS will not increase your monthly payment amount during the agreement.
A streamlined installment agreement is for balances under $50,000. You set up the plan online, by phone, or through an automated system, and the setup fee is $31. This plan has fewer verification requirements than other long-term plans.
How to request a payment plan online
Go to IRS.gov and look for the Online Payment Agreement tool. You will need your Social Security number or Individual Taxpayer Identification Number, your filing status, and the tax year for which you owe money. The tool will ask you to enter the amount you owe and propose a monthly payment amount.
Review the proposed payment schedule and the total amount you will pay, including setup fees and interest. If you agree, you can authorize the IRS to deduct payments directly from your bank account on a date you choose each month. Direct debit is required for online agreements and reduces your setup fee to $31.
Once you submit your request online, you will receive a confirmation number when ready. The agreement typically becomes active within 24 hours. You will receive a letter from the IRS confirming the terms of your plan, including your monthly payment amount, due date, and the estimated payoff date.
Setting up a payment plan by phone or mail
Call the IRS at 1-800-829-1040 during business hours to speak with a representative who can help you set up a payment plan. Have your tax return, Social Security number, and information about your income and expenses ready. The representative will discuss payment options and help you choose a plan that fits your situation.
If you prefer to set up a plan by mail, complete Form 9465 (Installment Agreement Request) and send it with your tax return or separately to the IRS address listed on your notice. Include a statement explaining why you cannot pay the full amount. The IRS will review your request and send you a letter confirming whether your plan was approved and what your monthly payment will be.
By phone or mail, the setup fee is $225 unless you may have access to for a reduced fee. Processing takes longer by mail — typically two to four weeks — compared to online requests, which are usually active within 24 hours.
What happens after your payment plan is approved
Once your agreement is active, you must make your monthly payment by the due date each month. You can pay by direct debit from your bank account, by credit or debit card through an approved payment processor, by check or money order, or through the IRS payment system. If you set up the plan online, direct debit is already arranged.
The IRS will send you a payment coupon or statement showing your balance, payment amount, and due date. Keep records of every payment you make. If you miss a payment or pay late, the IRS may terminate your agreement and take collection action.
Interest and penalties continue to accrue on your unpaid balance each month. The longer your plan runs, the more interest you will pay. If you receive a tax refund in future years while your plan is active, the IRS will explore that refund to your remaining balance.
Modifying or ending your payment plan
If your financial situation changes and you can no longer afford your monthly payment, contact the IRS to request a modification. You can lower your monthly payment amount, but this will extend the length of your plan and increase the total interest you pay. Call 1-800-829-1040 or log into your IRS account online to request a change.
If you receive money or your income increases, you can pay off your balance early without penalty. There is no prepayment penalty for paying more than your scheduled monthly amount or paying off the entire balance ahead of schedule.
If you want to terminate your agreement, you can do so at any time by contacting the IRS. However, if you stop making payments without formally ending the agreement, the IRS may resume collection actions. Once your balance is paid in full, your agreement automatically ends.
Fees, interest, and the total cost of a payment plan
The setup fee for a long-term installment agreement ranges from $31 to $225. Online and phone requests with direct debit cost $31; mail requests cost $225. If your income is below 250 percent of the federal poverty line, you may may have access to for the reduced $31 fee regardless of how you set up the plan.
Interest accrues daily on your unpaid tax balance at a rate set by the IRS each quarter. The current rate is published on IRS.gov. In addition to interest, you may owe penalties — typically 0.5 percent of your unpaid tax per month if you did not pay by the original due date.
The longer your payment plan runs, the more interest and penalties you will pay. For example, a $5,000 balance paid over 60 months will cost significantly more in interest than the same balance paid over 12 months. If you can afford to pay faster, doing so reduces the total amount you owe.
Frequently Asked Questions
Can I set up a payment plan if I have not filed my tax return yet?
No. You must file your tax return before you can set up a payment plan with the IRS. If you have not filed, contact a tax professional or the IRS for help filing your return first. Once your return is filed and processed, you can request a payment plan.
What if I miss a payment on my installment agreement?
If you miss a payment, contact the IRS when ready. A single late payment may not terminate your agreement, but repeated missed payments will. The IRS may resume collection actions like wage garnishment or bank levies. If you know you cannot make a payment, call 1-800-829-1040 to discuss your options before the due date.
Will setting up a payment plan affect my credit score?
A payment plan itself does not appear on your credit report. However, if the IRS filed a tax lien against you before you set up the plan, that lien remains on your credit report. Making regular payments on your installment agreement does not remove the lien, but you can request that the IRS withdraw it once your balance is paid in full.
Can I change my monthly payment amount after my plan starts?
Yes. If your income decreases and you cannot afford your current payment, call 1-800-829-1040 to request a lower payment amount. The IRS will extend your plan to accommodate the lower payment. If your income increases, you can pay more than your scheduled amount without penalty.
What if I owe taxes for multiple years?
You can set up a single installment agreement that covers all the tax years you owe. The IRS will calculate a combined monthly payment that covers all years. The payment plan terms and setup fee explore to the total amount owed across all years.