The IRS offers payment plans so you can pay what you owe over time instead of all at once
If you owe federal income tax and cannot pay the full amount by the deadline, the IRS lets you set up a payment plan (called an installment agreement) that spreads your debt across months or years. You can request a plan online, by phone, or by mail. The IRS charges a setup fee and interest on the unpaid balance, but a payment plan stops the IRS from taking collection action against you while you are making regular payments.
The process differs depending on how much you owe and whether you have filed your tax return. If you owe less than $50,000, you can set up a plan yourself without talking to anyone. If you owe more, or if you are behind on filing, you will need to contact the IRS directly.
Key Takeaways
- The IRS charges a setup fee (between $31 and $225 depending on your method) and interest on any unpaid balance, so a payment plan costs more than paying in full.
- You can set up a short-term plan online for free if you owe less than $50,000 and can pay within 180 days.
- Long-term plans (longer than 180 days) require a setup fee and monthly payments, and you must make payments on time or the plan will be cancelled.
- The IRS will not take wage garnishment or bank levy action while you are following an active payment plan.
- If your situation changes and you cannot make a payment, contact the IRS immediately to modify the plan rather than missing a payment.
Short-term plans: paying back within six months
A short-term payment plan is the cheapest option if you can pay off your debt within 180 days. There is no setup fee, no monthly payment requirement, and no interest charge beyond what you already owe. You simply tell the IRS when you will pay, and they hold off collection action until that date.
You request a short-term plan by calling the IRS at 1-800-829-1040 or by logging into your IRS online account at irs.gov and selecting "Set Up a Payment Plan" under the payment options. You will need your Social Security number, the tax year you owe for, and the amount you owe. The IRS will confirm your plan immediately.
Short-term plans work best if you are waiting for a bonus, a tax refund from another year, or money from selling an asset. If you miss the payment date, the IRS will resume collection action, so only commit to a date you can meet.
Long-term plans: monthly payments over years
If you need longer than 180 days to pay, you set up a long-term installment agreement with fixed monthly payments. The IRS charges a setup fee upfront ($31 to $225 depending on whether you set it up online or by phone) and interest on the unpaid balance each month. Interest accrues daily at a rate set quarterly by the IRS; as of 2024, the rate is around 8 percent per year, but this changes.
You can choose how long to spread payments over, but the longer the plan, the more interest you pay. A common choice is 60 months (five years), but you can request up to 72 months or longer depending on how much you owe. The IRS will calculate your monthly payment amount based on what you owe, the interest rate, and the length of the plan.
To set up a long-term plan, go to irs.gov, log into your online account, and select "Set Up a Payment Plan." You will enter the amount you owe and how many months you want to pay over. The IRS will show you the monthly payment and total interest cost before you confirm. If you do not have an online account, call 1-800-829-1040 and a representative will help you set one up.
Setup fees and what they depend on
| Setup Method | Setup Fee | When to Use |
|---|---|---|
| Online (irs.gov) | $31 | You have internet access and want the lowest fee. |
| Phone (1-800-829-1040) | $225 | You need help from a representative or cannot use the website. |
| Mail (Form 9465) | $225 | You do not have internet or phone access. |
| Short-term plan (under 180 days) | $0 | You can pay the full amount within six months. |
The setup fee is a one-time charge added to your first payment or to your tax bill. If you set up your plan online, the fee is $31. If you call the IRS or mail in a paper form (Form 9465), the fee is $225. The IRS may reduce or waive the fee if your income is below a certain level; ask when you call.
In addition to the setup fee, you pay interest on the unpaid balance. Interest compounds daily and is added to your balance each month. The longer your plan, the more total interest you pay, even if your monthly payment is lower.
What happens after you set up a plan
Once your plan is approved, the IRS will send you a confirmation letter with your payment amount, due date, and payment instructions. You can pay by direct debit from your bank account (the easiest method), by credit or debit card through an approved payment processor, by check or money order, or through the IRS payment portal at irs.gov/payments.
Your first payment is usually due within 30 days of approval. After that, payments are due on the same day each month. If you pay by direct debit, the IRS automatically withdraws the payment from your account on that date. If you pay by check or card, you are responsible for making sure the payment arrives on time.
While you are making payments on time, the IRS will not garnish your wages, levy your bank account, or place a lien on your property. However, if you miss a payment, the IRS can cancel your plan and resume collection action. If your situation changes and you cannot make a payment, call the IRS immediately at 1-800-829-1040 to modify the plan before you miss a payment.
Modifying or cancelling your plan
If your financial situation changes, you can modify your payment plan by logging into your IRS online account or by calling 1-800-829-1040. You can request a lower monthly payment (which extends the plan and increases total interest), a higher payment (which shortens the plan), or a different payment date.
If you receive a lump sum of money—a bonus, inheritance, or tax refund—you can pay off the plan early without penalty. The IRS will credit the payment to your balance and stop charging interest on the paid portion.
If you want to cancel the plan, you can do so at any time, but you will still owe the full balance plus any accrued interest. Cancelling does not erase the debt; it only ends the payment arrangement. Once cancelled, the IRS can resume collection action.
What to do if you cannot pay the monthly amount
If you miss a payment or realize you cannot afford the monthly amount, contact the IRS before the payment is due. Call 1-800-829-1040 and explain your situation. The IRS can lower your monthly payment by extending the plan, or in some cases, they can temporarily pause payments if you are facing a hardship.
If you miss a payment without contacting the IRS first, your plan will be cancelled after one missed payment. Once cancelled, the IRS can resume wage garnishment, bank levies, and other collection action. If this happens, call the IRS immediately to request reinstatement of your plan.
If your income has dropped significantly or you are facing a major hardship, you may be able to request Currently Not Collectible status, which temporarily pauses collection action while you recover financially. This is different from a payment plan and requires a separate request to the IRS.
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 so the IRS knows how much you owe. If you are behind on filing, contact a tax professional or the IRS to file before requesting a payment plan. Filing late incurs penalties, but setting up a plan after filing stops additional collection action.
What if I owe more than $50,000?
You can still set up a payment plan, but you cannot do it entirely online. Call the IRS at 1-800-829-1040 and speak with a representative. They will help you set up a plan and may ask about your income and assets to determine what monthly payment is reasonable.
Will a payment plan hurt my credit score?
A payment plan itself does not appear on your credit report. However, if the IRS filed a tax lien before you set up the plan, that lien will remain on your credit report even after you pay off the plan. Once you pay in full, you can request that the lien be removed.
Can I pay off my plan early without a penalty?
Yes. You can pay off the remaining balance at any time without penalty. The IRS will stop charging interest on the paid portion and credit any overpayment to future tax years or refund it to you.
What if my payment plan is cancelled and I cannot afford to pay the full amount?
Call the IRS immediately at 1-800-829-1040 to request reinstatement or to explore other options, such as a revised payment plan or Currently Not Collectible status. The sooner you contact them, the more options you may have.