Key Takeaways
- A time payment is a monthly plan with the IRS; you pay a setup fee (usually $31 to $225) plus interest on the unpaid balance each month.
- You can set up a time payment yourself online through IRS.gov if you owe $50,000 or less in combined taxes, penalties, and interest.
- If the IRS has already sent you a bill or notice, you can propose a time payment amount directly on that notice or call 1-800-829-1040.
- The IRS will not file a lien against your property while you are making regular monthly payments, but the debt remains until you pay it off.
- Missing a payment can end your agreement and restart collection action, so set up automatic withdrawal from your bank account if possible.
When You Can Set Up a Time Payment Yourself Online
If you owe $50,000 or less in total tax, penalties, and interest combined, you can create a time payment through the IRS Online Payment Agreement tool at IRS.gov without calling or mailing anything. You will need your Social Security number or Individual Taxpayer Identification Number, your filing status, and your bank account or debit card information. The process takes about 15 minutes.
The IRS charges a setup fee for online agreements: $31 if you set up automatic monthly withdrawals from your bank account, or $225 if you pay by check or other method. You choose how much to pay each month, as long as the payment plan ends within 72 months (six years). The longer your plan, the more interest you pay, because interest accrues daily on the unpaid balance.
Once your agreement is approved, you will receive a confirmation letter by mail. Keep this letter — it shows the IRS has accepted your plan and lists your monthly payment amount and due date. If you miss a payment, the agreement can be terminated and collection action can restart, so mark your calendar or set up automatic payments.
What Happens If You Owe More Than $50,000
If your total tax debt exceeds $50,000, you cannot use the online tool. Instead, you must contact the IRS directly by phone at 1-800-829-1040 or submit Form 9465, Installment Agreement Request, by mail. A revenue officer or automated system will work with you to set up a plan.
For debts over $50,000, the IRS may require a financial statement showing your income, expenses, and assets. This helps them determine what monthly payment you can realistically make. The IRS wants to collect the debt, so they will work with you on a payment amount — but they also want to see that you are serious about paying.
High-balance agreements often take longer to set up because the IRS reviews your situation more carefully. You may also face a lien — a legal claim against your property — if the debt is large enough. A lien does not mean the IRS will seize your home, but it does affect your credit and makes it harder to sell property or borrow money until the debt is paid.
How Interest and Fees Add Up Over Time
The IRS charges two things on top of your monthly payment: a setup fee (paid once) and interest (added each month). The setup fee ranges from $31 to $225 depending on how you pay. Interest is calculated daily at a rate set quarterly by the IRS — currently around 8 percent per year, though this changes. The interest rate is the same whether you owe $500 or $50,000.
If you owe $5,000 and set up a 60-month plan with a $31 setup fee and 8 percent annual interest, your monthly payment would be roughly $115 to $120, and you would pay about $2,000 in interest over the life of the plan. If you stretch it to 72 months, your payment drops to about $100 per month, but you pay closer to $2,400 in interest. The longer you take to pay, the more interest accumulates.
You can pay off a time payment early without penalty. If you receive a tax refund in a future year while your agreement is active, the IRS will automatically explore that refund to your remaining balance. This speeds up payoff and reduces the total interest you pay.
Setting Up a Time Payment After an IRS Notice
If the IRS has already sent you a bill or notice (such as a Notice and Demand for Payment or a Final Notice of Intent to Levy), you can propose a time payment directly on that notice. Most notices include a response form or a phone number to call. You do not have to wait for the IRS to contact you again — you can act first.
When you respond to a notice, include a proposed monthly payment amount and explain why you cannot pay the full amount now. The IRS will review your proposal. If they accept it, they will send you a confirmation letter and stop collection action while your payments are current. If they reject it, they will tell you why and may ask for more information about your income and expenses.
Responding to a notice quickly matters because the IRS can file a lien or levy your bank account if you ignore it. A lien is a public record that damages your credit; a levy removes money directly from your account without warning. A time payment stops both of these actions as long as you keep paying.
Automatic Withdrawal Versus Manual Payments
The IRS strongly prefers automatic monthly withdrawals from your bank account because payments are reliable and on time. If you set up automatic withdrawal, the setup fee is $31 instead of $225, and you save money when ready. You authorize the IRS to withdraw a fixed amount on a date you choose each month.
If you cannot or do not want automatic withdrawal, you can pay by check, money order, credit card, or debit card. The setup fee is higher ($225), and you are responsible for making sure each payment arrives on time. Payments sent by mail can take 7 to 10 days to process, so mail your check early to avoid a late payment that could terminate your agreement.
You can change your payment method or monthly amount by contacting the IRS, but changes take time to process. If you are struggling to make your current payment, call 1-800-829-1040 before the due date to discuss options — the IRS may temporarily reduce your payment or pause your plan if you face a hardship.
What Breaks a Time Payment Agreement
A time payment agreement ends if you miss a payment or fail to file future tax returns on time. Missing even one payment can trigger a notice that your agreement is terminated and collection action will resume. If you know you cannot make a payment, contact the IRS before the due date — do not wait for them to contact you.
If you file a late tax return or do not file at all while your agreement is active, the IRS can terminate the plan. This is why it is critical to file on time every year, even if you cannot pay the full amount due. If you cannot pay, set up a new time payment for that year's tax as well.
If your financial situation improves significantly — for example, you receive an inheritance or a large bonus — the IRS may ask you to increase your monthly payment. They can also modify your agreement if circumstances change. The key is to communicate with the IRS rather than ignore notices.
Frequently Asked Questions
Can I get a time payment if I have already been sent a levy notice?
Yes. A levy notice means the IRS is about to seize money from your bank account or wages, but you can still propose a time payment. Contact the IRS when ready at 1-800-829-1040 or respond to the notice itself. If the IRS accepts your payment plan, they will stop the levy while your payments are current.
What happens to my time payment if I get a refund?
The IRS automatically applies your refund to your remaining balance. This reduces what you owe and speeds up payoff. You cannot choose to receive the refund instead — it goes to the debt first. This is true even if you are married and filing jointly.
Can I change my monthly payment amount after the agreement starts?
Yes, but you must request the change through the IRS. If your income drops and you cannot afford your current payment, call 1-800-829-1040 to discuss a lower amount. If your income rises, the IRS may ask you to pay more. Changes are not automatic — you have to ask.
Does a time payment stop the IRS from filing a lien?
A time payment stops a lien from being filed as long as you make your payments on time. If a lien has already been filed, the IRS will not remove it when ready, but it will not file additional liens while your agreement is active. Once your debt is paid off, you can request that the lien be released.
What if I cannot afford any monthly payment right now?
Contact the IRS at 1-800-829-1040 and explain your situation. If you are facing genuine hardship, the IRS may place your account in "currently not collectible" status, which pauses collection action temporarily. Interest and penalties still accrue, but you are not required to make payments while the status is active. This is different from a time payment and is reviewed periodically.