Yes, you can set up a payment plan with the IRS if you owe taxes

The IRS allows you to pay what you owe in monthly installments instead of a lump sum. You do not have to pay the full amount at once. The IRS calls this an installment agreement, and there are several types depending on how much you owe and how quickly you can pay.

Setting up a plan stops the IRS from taking collection action against you while you are making regular payments. However, you will still owe penalties and interest on top of the original tax debt, and those continue to grow until the debt is fully paid.

Key Takeaways

  • The IRS offers short-term plans (120 days or less) at no setup cost and long-term plans (more than 120 days) with a one-time setup fee between $31 and $225 depending on how you set it up.
  • You can request a plan online through IRS.gov, by phone at 1-800-829-1040, or by mail using Form 9465, and the IRS will tell you within 30 days whether it approves your plan.
  • A payment plan does not reduce what you owe — it only spreads payments over time — and penalties and interest continue to accrue until the debt is paid in full.
  • If you cannot afford even a monthly payment, you may be able to request a temporary delay or an offer in compromise, which is a settlement for less than the full amount owed.

Types of payment plans the IRS offers

A short-term payment plan lets you pay off your debt in 120 days or less. There is no setup fee. You arrange the payment schedule directly with the IRS, and this option works if you can pay the full amount within four months.

A long-term installment agreement spreads payments over more than 120 days. The IRS charges a setup fee: $31 if you set it up online, $225 if you set it up by phone or mail. If your income is below a certain threshold (the threshold changes yearly), you may pay a reduced fee of $31. You can set up automatic monthly payments from your bank account, which is the most common method.

A streamlined installment agreement is available if you owe $50,000 or less in combined federal income tax, penalties, and interest. You can set this up online without talking to an IRS representative, and the process is faster. The setup fee is $31 if you use automatic payments from your bank account.

How to request a payment plan

You have three main routes: online, by phone, or by mail. Online is the fastest if you have a Social Security number, an Individual Taxpayer Identification Number (ITIN), or an Employer Identification Number (EIN), and you know the tax year and amount you owe.

Go to IRS.gov and select "Payment Plans" under the "Payments" section. You will enter your tax information and choose your monthly payment amount. The IRS will show you the total setup fee and the date your plan will end. You can set up automatic payments from your bank account at the same time. The IRS will send you a confirmation letter by mail within two weeks.

By phone, call 1-800-829-1040 during business hours (Monday through Friday, 7 a.m. to 7 p.m. your local time). Have your Social Security number, tax return information, and bank account details ready if you want to set up automatic payments. The IRS representative will walk you through the options and tell you the setup fee. You will receive a written agreement in the mail.

By mail, complete Form 9465 (Installment Agreement Request) and send it with your tax return or separately to the IRS address for your state. You can find the correct address on the form itself. Mail takes longer — expect four to six weeks for the IRS to process your request and send you a written agreement.

What happens after you request a plan

The IRS has 30 days to review your request and send you a written response. If the IRS approves your plan, you will receive an installment agreement letter that shows your monthly payment amount, the due date each month, and the date the agreement ends. Keep this letter — it is your proof that you have a plan in place.

Your first payment is usually due 20 to 30 days after the IRS approves your plan. If you set up automatic payments, the IRS will deduct the amount from your bank account on the date you chose. If you pay by check or money order, include your tax identification number and tax year on the payment.

While you are on a payment plan, the IRS will not pursue collection actions like wage garnishment or bank levies, as long as you make your payments on time. If you miss a payment, the IRS may cancel the agreement and resume collection efforts, so contact the IRS immediately if you cannot make a payment.

Setup fees and what they cover

The setup fee is a one-time charge added to your debt. For a long-term plan set up online with automatic payments, the fee is $31. If you set it up by phone or mail, the fee is $225. If your income is below the IRS threshold (which varies by filing status and family size), you may pay a reduced fee of $31 regardless of how you set it up.

The setup fee does not reduce your debt or count toward your first payment — it is added to what you owe. For example, if you owe $5,000 and set up a plan online, your total debt becomes $5,031. The fee is charged once, not every month.

Short-term plans have no setup fee because you are paying off the debt quickly. If you think you can pay within 120 days, this is the cheapest option.

Penalties and interest keep growing while you pay

A payment plan does not stop penalties and interest from accruing. The IRS charges a failure-to-pay penalty of 0.5% of your unpaid tax per month (or part of a month), and interest at a rate set quarterly by the IRS (currently around 8% per year, but this changes). Both continue to add to your debt every month until it is paid in full.

This means your monthly payment covers the current month's interest and penalty plus a portion of the original tax. If you pay slowly, you will pay significantly more in total than if you paid the full amount upfront. For example, a $5,000 debt paid over five years will cost considerably more due to accumulated interest and penalties.

You can reduce the total amount you pay by making larger payments when you can, or by paying the debt off early without penalty. There is no early payoff fee.

What to do if you cannot afford a monthly payment

If even a small monthly payment is too much, you have other options. You can request a temporary delay (called Currently Not Collectible status) if you are experiencing financial hardship. The IRS will pause collection efforts for up to 120 days while you stabilize your finances. Interest and penalties still accrue, but you do not have to make payments during this period.

You can also explore an offer in compromise, which is a settlement where you pay less than the full amount owed. The IRS considers this only if you cannot pay the full debt even over time, or if there is doubt about whether the debt is correct. The process takes several months and requires detailed financial information.

Contact the IRS at 1-800-829-1040 to discuss these options, or visit IRS.gov and search for "Currently Not Collectible" or "Offer in Compromise" for more information.

Frequently Asked Questions

Can I change my monthly payment amount after the plan starts?

Yes. Contact the IRS at 1-800-829-1040 or log into your account on IRS.gov to request a change. The IRS will review your request and send you a new agreement letter with the updated payment amount. You cannot change the amount more than once per year unless you have a significant change in income or expenses.

What happens if I miss a payment?

The IRS may cancel your agreement and resume collection action. Contact the IRS immediately if you miss a payment. In many cases, the IRS will reinstate your plan if you pay the missed amount within 30 days. If you cannot pay, ask about a temporary delay or a reduced payment amount.

Do I need a lawyer to set up a payment plan?

No. You can set up a plan yourself online, by phone, or by mail at no cost beyond the IRS setup fee. A tax professional or attorney can help if your situation is complex, but most people handle this on their own.

Will a payment plan affect my credit score?

A payment plan itself does not appear on your credit report. However, the original tax debt may have already been reported to credit bureaus. Once you pay off the debt, the IRS will report it as satisfied, which can help your credit over time.

Can I set up a plan for taxes owed from multiple years?

Yes. You can combine tax debts from different years into a single installment agreement. When you request the plan, tell the IRS which tax years you owe for, and they will include all of them in one agreement with one monthly payment.