IRS payment plans: How to set one up (and answers to common questions)

If you owe the IRS and can’t pay the full amount right now, you may be able to set up a payment plan (called an installment agreement) so you can pay over time. This guide walks you through the main IRS plan options, how to apply, what it costs, and how to avoid the most common mistakes that cause plans to be canceled. 

Before you apply: 3 things to know 

1. You must be current on filing. 

   In general, the IRS won’t approve a payment plan if you have missing tax returns. File any required returns first (even if you can’t pay yet). Generally, for individuals, the IRS requires you to file the current and past 5 years of returns to be considered filing compliant. 

2. A payment plan doesn’t stop interest and penalties. 

   Interest and late-payment penalties generally keep adding up until your balance is paid in full. A plan can still be worth it because it usually helps you avoid more aggressive collection actions, as long as you stay in good standing. 

3. Gather basics before you start. 

   Have your most recent tax return, your IRS notice (if you received one), your bank routing/account number (if you want automatic payments), and a realistic monthly amount you can pay. 

Pick the right plan: quick eligibility check 

Option 1: Short-term payment plan (pay in full within 180 days) 

A short-term plan is best if you can pay everything off within 180 days. According to the IRS, individuals can typically apply online if their total balance is under $100,000 (tax, penalties, and interest combined). Taxpayers who owe between $100,000 and $1 million can call the IRS and set up the extension to pay agreement. There’s no setup fee for a short-term plan. 

You can pay during the 180 days through your IRS online account/direct pay, by check or money order, or by card (card processors may charge a separate fee). Even though there’s no setup fee, interest and penalties still add up, so paying sooner lowers the total cost. 

Option 2: Long-term payment plan (monthly payments) 

If you need more than 180 days, you’ll usually need a long-term plan with a monthly payment. The simplest version is sometimes called a simple installment agreement. 

Simple installment agreement: If you owe $50,000 or less (including penalties and interest) and you’ve filed all required returns, you can often apply online and get an instant decision. You generally pick a monthly payment that pays the balance off before the IRS collection statute expiration date (10 years from the date the tax was assessed by the IRS). 

Non-streamlined installment agreements: If you owe between $50,000 and $250,000, you can also get into a payment plan quickly if you are able to fully pay the tax before the collection statute expiration date. You must contact the IRS by phone to obtain this type of payment plan. However, while the non-streamlined agreement is easy to obtain, the IRS will file a tax lien when it is approved.   

More complex situations: If you owe more than the simple or non-streamlined limits, need a lower monthly payment than these agreements allow, owe greater than $250,000, or have other complications, the IRS may require a financial statement (often Form 433-F or Form 433-A) to verify what you can afford. 

Partial payment plan (in some cases): If you truly can’t afford to pay the full balance before the IRS’s collection time runs out, the IRS may allow a partial payment installment agreement. These usually require detailed financial disclosure and periodic reviews, and the IRS can change the payment if your finances improve. 

How to apply online (usually the fastest option) 

The IRS Online Payment Agreement tool lets many individuals apply for a plan and get a decision right away. In most cases, you’ll choose the plan type (short-term or simple installment agreement), pick your monthly payment (for the simple), and set a payment method. 

After your plan is set up, you can often manage it online—such as changing your payment amount or due date (if allowed), converting to automatic payments (direct debit), or updating your bank information. 

What does it cost? Long-term plans usually have a one-time setup fee, and the amount depends on how you apply and how you pay. The IRS typically charges lower fees for applying online and using direct debit (automatic bank payments). Low-income taxpayers may qualify for a reduced fee or a waiver. Fees can change, so confirm the current amounts when you apply on IRS.gov. 

Other ways to apply (if you can’t apply online) 

If you aren’t eligible to apply online, or you prefer not to, you can request a plan by mail or by phone. These methods can take longer and may have higher setup fees for long-term plans. 

Apply by mail (Form 9465): You can mail Form 9465, Installment Agreement Request to ask for monthly payments. In higher-balance or lower-payment situations, the IRS may also ask for a financial statement (such as Form 433-F) if you are requesting payment terms that are different from the simple installment agreement. Mailing is reliable, but it’s usually slower than applying online. 

Apply by phone: You can call the number on your IRS notice, or the IRS general lines, to request a plan—especially if your situation doesn’t fit the online rules. Be ready to discuss your balance, how much you can pay monthly, and (if asked) your income and expenses. 

Choose a payment method (direct debit is usually best) 

When you set up a long-term plan, you’ll choose how you’ll pay each month. Direct debit (automatic withdrawal from your checking account) is often the safest option because it reduces missed payments and is commonly cheaper to set up than mailing checks or paying manually. 

How payment plans get canceled (defaulted): Plans are most often canceled because a payment is missed (or a bank draft is returned). A plan can also be canceled if you don’t file future returns on time or you owe new taxes and don’t pay them. If your bank account changes, update your plan right away so payments don’t fail. 

Easy ways to avoid problems: (1) Use direct debit, if possible, (2) keep enough money in the account before the due date, (3) file every return on time, and (4) adjust your withholding/estimated payments so you don’t owe again next year.