What an IRS payment plan does and who can set one up
An IRS payment plan lets you pay your tax debt over time instead of in one lump sum. The IRS calls these "installment agreements." You make monthly payments directly to the IRS until your balance is paid off, and during that time the IRS agrees not to take collection action like wage garnishment or bank levy.
You can set up a payment plan if you owe federal income tax, self-employment tax, or certain other federal taxes. The IRS offers payment plans to almost anyone who owes, regardless of income or credit score. The main requirement is that you file your tax return first — you cannot set up a plan for taxes you have not yet reported.
Payment plans come in two types: short-term (you pay within 180 days) and long-term (you pay over several years). Short-term plans have no setup fee. Long-term plans charge a setup fee that varies depending on how you set up the plan, and you also pay interest and penalties on top of your original tax debt for as long as the plan is active.
Key Takeaways
- You must file your tax return before you can set up a payment plan, even if you cannot pay what you owe.
- Short-term plans (180 days or less) have no setup fee; long-term plans charge $31 to $225 depending on whether you set up online or by phone.
- Interest and penalties continue to accrue on your unpaid balance every month you are on a payment plan.
- The IRS can end your payment plan if you miss a payment or file a late return while the plan is active.
- Setting up online through IRS.gov is faster and cheaper than calling or mailing in a form.
How to set up a payment plan online or by phone
The fastest way to set up a payment plan is through the IRS website at IRS.gov/payments. You will need your Social Security number, date of birth, filing status, and the tax year you owe for. The IRS will pull up your account and show you how much you owe, then walk you through choosing a payment amount and due date.
If you set up online, the IRS charges a $31 setup fee for a long-term plan. You can authorize the IRS to withdraw money from your bank account on a date you choose each month — this is called a direct debit arrangement. If you choose direct debit, the setup fee drops to $31 (it does not drop further). If you pay by check or money order instead, the fee stays at $31.
You can also call the IRS at 1-800-829-1040 to set up a plan by phone. A representative will walk you through the same process, but the setup fee is higher: $225 for a long-term plan if you do not use direct debit, or $225 if you do. (The phone fee structure has not changed in recent years, making online setup significantly cheaper.)
If you cannot pay online or by phone, you can mail Form 9465 (Installment Agreement Request) to the IRS address listed in your tax notice. Mailed requests take longer to process — usually 30 to 60 days — and you still pay the setup fee.
Payment amounts, due dates, and how long plans last
When you set up a plan, you choose how much to pay each month and what day of the month the payment is due. The IRS will suggest a payment amount based on how much you owe and how long you want the plan to last, but you can negotiate a different amount if you cannot afford the suggestion.
The longer your plan lasts, the lower your monthly payment — but the more interest and penalties you pay overall. For example, if you owe $5,000 and set up a 36-month plan at $150 per month, you will pay interest and penalties on top of that $150 each month. If you stretch it to 60 months at $100 per month, your interest and penalties will be higher because you are paying over a longer time.
Your payment is due on the date you choose each month. If you miss a payment, the IRS will send you a notice. If you miss three payments in a row, the IRS can end your plan and demand the full remaining balance immediately. If that happens, you can request a new plan, but the IRS may reject it if you have a pattern of missed payments.
Short-term plans (180 days or less) do not have a setup fee and are useful if you can pay off your debt quickly. Long-term plans typically last 24 to 72 months depending on how much you owe and what you can afford to pay each month.
Interest, penalties, and the cost of paying over time
When you owe the IRS, you owe three things: the original tax, a failure-to-pay penalty, and interest. The failure-to-pay penalty is 0.5% of your unpaid tax per month (up to 25% total). Interest is calculated daily and compounds — it is currently around 8% per year, but the IRS adjusts it quarterly.
All three of these continue to grow while you are on a payment plan. If you owe $5,000 and set up a 60-month plan, you will pay $100 per month toward the original $5,000, but you will also pay interest and penalties each month on the remaining balance. By the time you finish the plan, you may have paid $1,000 or more in interest and penalties on top of the original $5,000.
The IRS does not waive interest or penalties just because you are on a payment plan. The only way to stop interest and penalties from growing is to pay off your debt in full. If your financial situation improves and you can pay a lump sum, you should do so — it will save you money on interest.
You can check your current balance, including interest and penalties, by logging into your IRS account at IRS.gov/account or by calling 1-800-829-1040.
What happens if you miss a payment or your circumstances change
If you miss a payment, the IRS will send you a notice in the mail. You have the right to request a short-term extension (up to 120 days) without losing your payment plan. You can request this extension online, by phone, or by mail.
If you miss three payments in a row, the IRS will terminate your payment plan and send you a notice demanding the full remaining balance. At that point, you can request a new plan, but the IRS may impose stricter terms or reject your request if you have a history of missed payments.
If your financial situation changes and you can no longer afford your monthly payment, you can request to modify your payment plan. You can lower your monthly payment amount or extend the length of the plan (up to a maximum of 72 months for most debts). You can modify your plan online at IRS.gov, by phone, or by mail. There is no fee to modify an existing plan.
If you file a late tax return while you are on a payment plan, you must notify the IRS. Depending on the circumstances, the IRS may end your plan. This is why it is important to file on time every year, even if you cannot pay what you owe.
When the IRS can end your payment plan
The IRS can terminate your payment plan if you miss three consecutive payments, file a late return while the plan is active, or fail to pay other taxes that come due during the plan. The IRS will send you a notice before terminating the plan, giving you a chance to catch up or request a modification.
If your plan is terminated, you owe the full remaining balance immediately. The IRS can then pursue collection actions like wage garnishment, bank levy, or a lien on your property. You can request a new payment plan after termination, but the IRS may reject it or impose stricter terms.
You can also voluntarily end your payment plan at any time by paying off the remaining balance in full. There is no penalty for paying early.
Comparing payment plans to other options for tax debt
A payment plan is not the only way to handle tax debt. If you cannot afford to pay even a small monthly amount, you may be able to request Currently Not Collectible (CNC) status. This temporarily pauses collection action while you are in financial hardship, though interest and penalties continue to accrue. CNC status lasts up to 120 days at a time and must be renewed.
If you owe a large amount and cannot pay it off within 72 months, you may be able to request an Offer in Compromise (OIC). This is a settlement where you pay less than you owe, but the IRS only accepts OICs in specific situations — usually when you genuinely cannot pay the full amount even over time. The application process is lengthy and the IRS rejects most requests.
A payment plan is the most straightforward option for most people who owe the IRS. It keeps you in compliance, stops collection action, and lets you pay at a pace you can afford.
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, even if you cannot pay what you owe. Filing the return starts the clock on penalties and interest, but it is required before you can set up a payment plan. If you have not filed, contact a tax professional or the IRS to file your return as soon as possible.
What if I cannot afford any monthly payment?
If you are in financial hardship and cannot afford even a small payment, you can request Currently Not Collectible status. This pauses collection action for up to 120 days while you recover financially. Interest and penalties continue to accrue, and you will eventually need to set up a payment plan or pay the debt in full.
Can the IRS garnish my wages if I am on a payment plan?
No. Once your payment plan is approved, the IRS agrees not to garnish wages, levy your bank account, or place a lien on your property — as long as you make your payments on time and stay current with future tax returns. If you miss three payments, the plan ends and collection action can resume.
Do I have to use direct debit, or can I pay by check?
You can pay by check, money order, or direct debit. Direct debit is cheaper (the setup fee is the same, but you avoid late fees if the IRS has to chase you for payment). You can also pay online through IRS.gov using a debit or credit card, though the IRS charges a processing fee for that method.
What if I pay off my debt early?
You can pay off your remaining balance at any time without penalty. There is no prepayment fee, and you will save money on interest by paying early. You can make a lump-sum payment online at IRS.gov, by phone, or by mail.