What an IRS payment plan is and when you need one
An IRS payment plan (also called an installment agreement) lets you pay your tax bill in monthly chunks instead of all at once. You set this up directly with the IRS through their website, by phone, or by mail — you do not go through a bank or third party.
You need a payment plan if you owe taxes but cannot pay the full amount by the tax important date. The IRS charges interest and penalties on unpaid taxes, so a payment plan stops those charges from growing as fast as they would if you straightforward ignored the bill. The plan itself also costs money — there is a setup fee and you still owe interest — but it keeps you in good standing with the IRS instead of risking wage garnishment or a tax lien on your property.
The IRS offers different types of plans depending on how much you owe and your situation. For most people, the Online Payment Agreement tool on IRS.gov is the fastest and cheapest way to set one up.
Key Takeaways
- You can set up a payment plan on IRS.gov using the Online Payment Agreement tool if you owe $50,000 or less in combined taxes, penalties, and interest.
- The setup fee ranges from $31 to $225 depending on which type of plan you choose and how you pay the fee.
- You will need your Social Security number or Individual Taxpayer Identification Number, your filing status, and the tax year you owe for.
- Monthly payments typically start 20 to 30 days after you set up the plan, and you can change your payment amount or due date later if your situation changes.
- If you owe more than $50,000 or need a longer payment period, you must call the IRS at 1-800-829-1040 or work with a tax professional instead.
Who can use the online payment agreement tool
The IRS Online Payment Agreement tool is open to individual taxpayers who owe $50,000 or less. This limit includes your unpaid taxes, penalties, and interest all added together. If you owe more than that, you cannot use the online tool — you will need to call the IRS or have a tax professional set up a plan for you.
You also need to have filed your tax return for the year you owe on. If you have not filed yet, you must file first before you can set up a payment plan. The IRS will not let you create a plan for a return that does not exist in their system.
The tool works for federal income tax, self-employment tax, and other federal taxes. It does not work for state taxes — each state has its own payment plan process.
What you need before you start
Gather these items before you log into the IRS website:
- Your Social Security number or Individual Taxpayer Identification Number (ITIN)
- Your filing status from your tax return (single, married filing jointly, married filing separately, head of household, or may have access to widow/widower)
- The tax year you owe for (for example, 2023 or 2024)
- Your adjusted gross income (AGI) from your most recent tax return
- A bank account number and routing number if you plan to pay by automatic withdrawal from your checking or savings account
You do not need to have your tax return in front of you — the IRS will pull your information from their records once you enter your Social Security number and filing status. But having it nearby makes the process faster.
How to set up your payment plan on IRS.gov
Go to IRS.gov and search for "Online Payment Agreement" or navigate to the payment agreement section under "Payments." You will land on a page that explains your options. Click the button to start the Online Payment Agreement tool.
The tool will ask you to enter your Social Security number, filing status, and the tax year you owe for. It will then show you the amount the IRS has on record that you owe. Review this carefully — if the amount is wrong, stop and call the IRS at 1-800-829-1040 before continuing, because setting up a plan for the wrong amount will not solve your problem.
Next, you will choose your payment plan type. The IRS offers two main options for the online tool: a short-term payment plan (you pay off the debt in 120 days or less) and a long-term installment agreement (you pay it off over several months or years). The tool will calculate a suggested monthly payment based on how long you want to take, but you can adjust it if you need a smaller or larger payment.
Then you will choose how to pay each month. Your options are automatic withdrawal from a bank account (the cheapest), a credit or debit card (which charges a processing fee on top of the IRS fee), or a check you mail in. Automatic withdrawal has the lowest setup fee, so most people choose that option.
Finally, you will review the setup fee (which the IRS will either add to your first payment or charge separately, depending on your choice), agree to the terms, and submit. You will get a confirmation number on screen — write it down or take a screenshot.
Setup fees and what they cover
The IRS charges a setup fee to create your payment plan. The amount depends on which type of plan you choose and how you pay:
| Plan Type | Automatic Withdrawal | Credit/Debit Card or Check |
|---|---|---|
| Short-term (120 days or less) | $31 | $225 |
| Long-term installment agreement | $31 | $225 |
The setup fee is a one-time charge. On top of this, you will owe interest on your unpaid taxes — the IRS charges interest daily until your balance is zero. You will also continue to owe any penalties the IRS assessed. The payment plan does not erase these; it just lets you pay them off over time instead of in one lump sum.
If you set up automatic withdrawal, the IRS can deduct the setup fee from your first payment, or you can pay it separately by credit card or check. If you choose to pay by card or check, you must pay the setup fee upfront — it is not added to your plan.
When your first payment is due and how to make payments
Your first payment is usually due 20 to 30 days after you set up the plan. The exact date will be in your confirmation and in the payment agreement letter the IRS mails to you. Mark this date on your calendar — missing a payment can cause the IRS to cancel your plan.
If you chose automatic withdrawal, the IRS will deduct your payment from your bank account on the due date each month. You do not have to do anything — it happens automatically. If you chose to pay by check or card, you will need to make the payment yourself each month on time.
You can make a payment online through IRS.gov, by phone at 1-800-829-1040, by mail, or through a payment processor like the ones listed on the IRS website. If you pay online, the IRS accepts payments from a bank account (free) or a credit or debit card (processing fee applies).
Changing your payment amount or due date later
Life happens. If you need to change your monthly payment amount or move your due date, you can do this through your IRS online account or by calling 1-800-829-1040. You do not need to set up a whole new plan.
If you want to pay off the plan early, you can do that anytime without penalty. The IRS will not charge you extra for paying faster. Just make sure you know your exact balance before you send a final payment, because the balance changes daily as interest accrues.
If your situation gets worse and you cannot afford your monthly payment, call the IRS right away. They may be able to lower your payment or extend your plan, but only if you contact them before you miss a payment.
What happens if you miss a payment
If you miss a payment, the IRS will send you a notice. You have a grace period — usually 30 days — to make the payment before the IRS cancels your plan. If your plan is cancelled, you are back to owing the full amount, and the IRS may pursue other collection actions like wage garnishment or a tax lien.
If you know you will miss a payment, call the IRS before the due date. They may be able to adjust your due date or work with you on a solution. Calling ahead is much better than missing the payment and hoping the IRS does not notice.
Frequently Asked Questions
Can I set up a payment plan if I have not filed my tax return yet?
No. You must file your return first. The IRS cannot create a payment plan for a return that does not exist in their system. File your return, then set up the payment plan once the IRS has processed it.
What if I owe more than $50,000?
You cannot use the online tool. Call the IRS at 1-800-829-1040 or work with a tax professional or enrolled agent who can set up a plan for you. The IRS offers long-term installment agreements for larger amounts, but you have to go through a different process.
Can I pay off my plan early without a penalty?
Yes. You can pay off your plan anytime without extra charges. Just contact the IRS to find out your exact payoff amount, because interest accrues daily and the balance changes constantly.
Will setting up a payment plan hurt my credit score?
The IRS does not report payment plans to credit bureaus, so setting up a plan itself will not hurt your credit. However, if you had unpaid taxes before the plan was created, that may already be on your credit report. Paying on time through your plan will not remove it, but it stops the damage from getting worse.
What if I cannot afford the monthly payment the tool suggests?
You can lower the payment amount during setup, which will extend how long you take to pay off the plan. You can also call the IRS at 1-800-829-1040 to discuss your situation — they may have other options if the online tool's suggestions do not work for your budget.