Yes, you can set up a payment plan with the IRS, and you have several options depending on how much you owe
The IRS allows you to pay taxes over time through what they call an installment agreement. You do not have to pay your entire tax bill at once. The IRS offers both short-term plans (120 days or less) and long-term plans (more than 120 days), and the process to set one up depends on how much you owe and whether you want to do it online or by phone.
If you owe less than $50,000 in combined taxes, penalties, and interest, you can set up a plan yourself without talking to a representative. If you owe more, you will need to work with the IRS directly, and you may need to provide financial information to show why you cannot pay in full.
State tax agencies also offer payment plans for state income taxes, though the rules and processes vary by state. Some states let you set up a plan online; others require a phone call or written request.
Key Takeaways
- The IRS offers short-term plans (up to 120 days) and long-term installment agreements for amounts under $50,000, both of which you can set up online without speaking to anyone.
- Monthly payments on an IRS installment agreement include the tax owed plus a setup fee (currently $31 to $225 depending on the method) and interest that accrues daily until the balance is paid.
- If you owe more than $50,000, you must contact the IRS by phone or mail and may need to provide a financial statement showing why you cannot pay in full.
- State tax agencies have their own payment plan rules; contact your state tax department directly to learn what options are available in your state.
- Setting up a plan stops the IRS from taking collection action, but penalties and interest continue to grow on the unpaid balance.
How to set up a payment plan online if you owe under $50,000
Go to IRS.gov and look for the Online Payment Agreement tool. You will need your Social Security number or Individual Taxpayer Identification Number, your date of birth, and your mailing address. The tool will ask you how much you want to pay each month and will show you the total cost of the plan, including fees and interest.
You can choose a due date that works for your paycheck — the 15th, the 22nd, or the last day of the month. The IRS will deduct the payment automatically from your bank account each month. Once you submit the agreement, you will receive a confirmation number immediately, and the IRS will mail you a formal notice within 30 days.
If you prefer not to use automatic payments, you can still set up a plan online, but the setup fee is higher ($225 instead of $31), and you will have to make manual payments each month by check, money order, or credit card.
What happens if you owe more than $50,000
You cannot use the online tool. Instead, call the IRS at 1-800-829-1040 (individual taxes) or 1-800-829-4933 (business taxes). Have your tax return and a recent notice from the IRS in front of you when you call.
The IRS representative will ask about your income, expenses, and assets to determine what you can afford to pay each month. They may ask you to submit Form 433-F (a short financial statement) or Form 433-A (a longer one with more detail). This process can take several weeks, and you may need to provide documents like pay stubs, bank statements, or proof of other debts.
Once the IRS approves your plan, the terms are the same as an online agreement — automatic monthly payments, setup fees, and daily interest on the unpaid balance.
Short-term plans versus long-term installment agreements
A short-term plan is for amounts you can pay off in 120 days or less. There is no setup fee, and interest still accrues, but you avoid some of the paperwork. You can set this up online or by calling the IRS.
A long-term installment agreement is for amounts that will take more than 120 days to pay. This is what most people use. The setup fee ranges from $31 (if you use automatic bank payments) to $225 (if you pay manually). Interest accrues daily on the unpaid balance at the current IRS rate, which changes quarterly.
The longer your plan, the more interest you will pay overall. For example, a $5,000 tax debt paid over 60 months will cost significantly more in interest than the same debt paid over 24 months. The IRS will show you the total cost before you agree to the plan.
How payment plans work with state taxes
Each state has its own rules. Some states, like California and New York, let you set up a payment plan online through their tax department websites. Others require you to call or mail a written request. A few states do not offer payment plans at all and will refer you to a collection agency if you do not pay in full.
Contact your state tax department directly — search "[your state] tax payment plan" to find the right phone number or website. Have your state tax ID number and the notice from the state ready when you call. State payment plans typically include interest and penalties, just like federal plans, though the rates vary by state.
If you owe both federal and state taxes, you will need to set up separate plans with each agency. Paying one does not count toward the other.
What to do if you cannot afford the monthly payment the IRS suggests
If the IRS calculates a monthly payment that is too high, you can request a lower amount. Call 1-800-829-1040 and explain your situation. The IRS can extend the plan to lower the monthly payment, though this means paying more interest overall.
You can also request a Currently Not Collectible status if you truly cannot pay anything right now. This temporarily pauses collection action, though penalties and interest continue to grow. The IRS will review your case every two years to see if your situation has improved. This is not a forgiveness — you still owe the full amount, and the IRS can resume collection efforts later.
If your financial situation changes and you can pay more, you can modify your plan by calling the IRS or using the Online Payment Agreement tool to increase your monthly payment.
Penalties and interest keep growing while you pay
Setting up a payment plan stops the IRS from taking collection action like wage garnishment or bank levies, but it does not stop penalties and interest from accruing. Every month, the unpaid balance grows by the current interest rate (which the IRS sets quarterly) plus any applicable penalties.
The IRS charges a failure-to-pay penalty of 0.5% of the unpaid tax per month (up to 25% total). If you also failed to file your return on time, there is an additional failure-to-file penalty. These penalties are separate from interest and continue to add up until the balance is paid.
This is why paying as much as you can afford each month matters — the faster you pay, the less interest and penalties accumulate. Even increasing your monthly payment by $50 or $100 can save hundreds of dollars over the life of the plan.
Frequently Asked Questions
Will setting up a payment plan hurt my credit score?
The IRS does not report to credit bureaus, so an IRS payment plan itself will not appear on your credit report. However, if the IRS filed a tax lien (a legal claim against your property), that lien may appear on your credit report and could affect your score. Setting up a payment plan can prevent a lien from being filed in the first place.
Can I change my monthly payment amount after I set up the plan?
Yes. If your income changes or your situation improves, call the IRS at 1-800-829-1040 or log into your online account to modify the plan. You can increase or decrease your monthly payment, though decreasing it will extend the plan and increase total interest paid.
What happens if I miss a payment on my installment agreement?
If you miss a payment, the IRS will send you a notice. If you miss payments for 30 days or more, the agreement can be terminated, and the IRS can resume collection action. Contact the IRS immediately if you know you will miss a payment to discuss options.
Do I need a lawyer to set up a payment plan?
No. You can set up a plan yourself online or by phone at no cost. A tax professional or attorney can help if you owe more than $50,000 and need to negotiate terms, but most people handle it directly with the IRS.
Can I set up a payment plan for taxes I have not filed yet?
No. You must file your tax return first. If you owe taxes but have not filed, contact a tax professional or the IRS to file the return before setting up a payment plan. The IRS can file a return for you if you do not, but it will include penalties and interest.