The three ways to set up an IRS payment plan

You can set up an IRS payment plan in three ways: online through the IRS website (fastest, takes minutes), by phone with an IRS representative, or by mail. The online route works if you owe $50,000 or less in combined taxes, penalties, and interest. If you owe more, you must call or mail a form. The IRS charges a setup fee—usually $31 to $225 depending on which method you use and your income level—and you'll pay interest and penalties on top of your tax debt until the plan is paid off.

A payment plan doesn't reduce what you owe. It spreads your debt across months or years so you can pay in installments instead of a lump sum. The IRS will continue to charge interest and penalties during the plan, so the longer you take to pay, the more you'll owe overall. But a payment plan stops the IRS from taking collection action like wage garnishment or bank levies while you're making regular payments.

Key Takeaways

  • You can set up a payment plan online at IRS.gov if you owe $50,000 or less; phone and mail options work for larger amounts.
  • The IRS charges a setup fee between $31 and $225, plus interest and penalties continue to accrue on your unpaid balance.
  • A short-term plan (120 days or fewer) has a lower setup fee than a long-term plan and stops collection action while you pay.
  • You must make your first payment by the due date shown in your payment plan agreement, or the plan will be cancelled.
  • If your financial situation changes, you can modify your plan by contacting the IRS or logging into your online account.

Setting up a payment plan online

Go to IRS.gov and search for "Online Payment Agreement." You'll land on a page with a button labeled "Set Up a Payment Agreement." Click it and you'll be taken to a secure portal where you enter your Social Security number, filing status, and tax year. The system will pull up your account and show you exactly what you owe.

Next, you choose between a short-term plan (pay within 120 days) or a long-term plan (pay over several months or years). For a short-term plan, the setup fee is $31. For a long-term plan, the fee is $225 if you set it up online, or $31 if you set it up by phone or mail. The system will calculate how much your monthly payment needs to be based on the timeframe you choose. You can adjust the monthly amount if you want to pay faster or slower, but the IRS has minimum monthly payment amounts—usually at least $25.

Once you've chosen your payment amount and plan length, you'll select a payment method: direct debit from your bank account, credit or debit card, or electronic federal tax payment system (EFTPS). Direct debit is the cheapest option and is required for some payment plans. You'll also choose the day of the month your payment is due. The agreement will be finalized immediately, and you'll receive a confirmation number and a copy of your plan details.

Setting up a payment plan by phone or mail

Call the IRS at 1-800-829-1040 (individual taxpayers) or 1-800-829-4933 (business taxpayers). Wait times vary, but calling early in the morning or mid-week usually means shorter holds. Tell the representative you want to set up a payment plan. They'll verify your identity, pull up your account, and walk you through the same choices: short-term or long-term, monthly payment amount, and payment method.

If you prefer to mail a form, download Form 9465 (Installment Agreement Request) from IRS.gov and mail it to the address shown in your tax notice. Include a check or money order for the setup fee if you're paying by mail. The IRS will process your request within 30 days and send you a written agreement. This method is slower than online or phone, so use it only if you can't access the internet or phone.

What happens after your plan is approved

Your payment plan agreement will show your first payment due date, your monthly payment amount, and the total number of payments. You must make your first payment by that due date, or the IRS will cancel the plan. After that, your payment is due on the same day each month.

If you pay by direct debit, the IRS will automatically withdraw your payment from your bank account on the due date each month. If you pay by check, credit card, or EFTPS, you're responsible for sending or scheduling the payment before the due date. If you miss a payment, the IRS will send you a notice. If you miss two payments in a row, the plan is cancelled and the IRS can resume collection action.

Interest and penalties continue to accrue on your unpaid balance throughout the plan. The IRS publishes the current interest rate (usually around 8% per year, but it changes quarterly) and adds it to your balance each month. This means your total debt grows while you're paying, even though you're making regular payments. The longer your plan, the more interest you'll pay overall.

Modifying or cancelling your payment plan

If your financial situation changes and you can pay faster, you can increase your monthly payment or pay off the plan early without penalty. If you need to pay slower, you can request a modification—the IRS will recalculate your monthly payment based on a longer timeframe. You can modify your plan online through your IRS account, by phone, or by mail.

If you want to cancel your plan, you can do so at any time, but you'll still owe the full tax debt plus interest and penalties. Once the plan is cancelled, the IRS can resume collection action. Only cancel if you're certain you can pay the full amount in another way.

Payment plan fees and how they're calculated

The setup fee depends on how you set up the plan and how much you owe. If you owe $25,000 or less and set up online, the fee is $225. If you set up by phone or mail, it's $31. If you owe more than $25,000, the fee is $225 regardless of method. Low-income taxpayers (those with income below 250% of the federal poverty line) pay a reduced setup fee of $31.

The setup fee is added to your tax debt and included in your payment plan. So if you owe $5,000 and set up a plan online, your total debt becomes $5,225, and your monthly payments are calculated on that amount. Some payment plans allow you to pay the setup fee separately in your first payment, while others roll it into the plan from the start.

What to do if the IRS rejects your payment plan request

The IRS will reject a payment plan request if you owe more than $50,000 (you'll need to call or mail instead), if you haven't filed all required tax returns, or if you're currently in bankruptcy. If your request is rejected, you'll receive a notice explaining why. If the reason is missing tax returns, file them first and then resubmit your plan request.

If you owe more than $50,000, you can still set up a plan by calling 1-800-829-1040 or mailing Form 9465. For amounts over $50,000, the IRS may require a financial statement to verify you can't pay in full. If you're in bankruptcy, you must wait until your case is resolved before setting up a plan with the IRS.

Frequently Asked Questions

Can I set up a payment plan if I owe penalties and interest, not just the original tax?

Yes. Your payment plan covers the original tax, penalties, and interest all together. The IRS calculates what you owe in total and your monthly payment is based on that amount. Interest and penalties continue to accrue after the plan starts, so your total debt will grow slightly each month.

What if I can't afford the minimum monthly payment?

Call the IRS at 1-800-829-1040 and explain your situation. If you're experiencing financial hardship, the IRS may lower your monthly payment or place your account in "currently not collectible" status temporarily, which pauses collection action while you get back on your feet. This isn't a payment plan—it's a temporary hold—but it stops the IRS from taking collection action.

Do I have to pay the setup fee upfront?

No. The setup fee is added to your tax debt and included in your payment plan. You pay it off as part of your monthly payments. Some plans allow you to pay it in your first payment, while others spread it across all payments.

What happens if I miss a payment?

The IRS will send you a notice. If you miss two payments in a row, your plan is cancelled and the IRS can resume collection action like wage garnishment or bank levies. If you miss a payment, contact the IRS immediately to catch up or modify your plan.

Can I set up a payment plan for a prior year's taxes while I'm still paying current year taxes?

Yes. You can have multiple payment plans with the IRS for different tax years. Each plan is separate, and you'll make payments on each one according to its schedule. If you owe for multiple years, you can combine them into a single plan by calling the IRS.