The IRS offers payment plans if you cannot pay your full tax bill at once
If you owe federal income tax and do not have the money to pay it all now, the IRS lets you pay in installments through a payment plan (also called an installment agreement). You can set up a plan that spreads your debt over months or years. The IRS charges interest and a setup fee, but a plan stops them from taking collection action against you while you are making regular payments.
The type of plan you get depends on how much you owe and how you want to pay. Some plans are automatic and cost nothing to set up. Others require you to apply and pay a fee upfront. You can start a plan online, by phone, or by mail.
Key Takeaways
- Short-term payment plans (120 days or less) have no setup fee if you pay by direct debit from your bank account.
- Long-term installment agreements cost between $31 and $225 to set up, depending on how you pay and your income level.
- You can request a plan online through IRS.gov, by calling 1-800-829-1040, or by mailing Form 9465 with your tax return or bill.
- Interest and penalties continue to accrue on your unpaid balance, so paying faster saves you money even if you are on a plan.
- If your circumstances change and you cannot make a payment, contact the IRS right away to modify or suspend your plan.
Short-term plans: paying within 120 days
A short-term plan lets you pay your full tax debt within 120 days or fewer. There is no setup fee if you pay by direct debit (automatic withdrawal from your bank account). If you pay by check, money order, or credit card, the IRS charges a $31 setup fee.
You can request a short-term plan online at IRS.gov, through the IRS2Go mobile app, or by calling 1-800-829-1040. The process is fast—you can often get approval the same day. Interest and penalties still accrue on your balance, so this plan works best if you know you can pay the full amount within a few months.
Short-term plans do not require you to submit Form 9465 (Installment Agreement Request). The IRS treats your request as a payment arrangement rather than a formal agreement, which is why the fees are lower.
Long-term installment agreements: 24 months or longer
If you need more than 120 days to pay, you can set up a long-term installment agreement that spreads payments over years. The IRS allows plans as long as the statute of limitations on your debt—usually 10 years from the date they assess the tax.
Setup fees for long-term plans range from $31 to $225, depending on your income and how you pay:
| Payment Method | Fee for Direct Debit | Fee for Other Methods |
|---|---|---|
| Direct debit (automatic bank withdrawal) | $31 | — |
| Check, money order, credit card, or debit card | — | $225 |
| Low-income taxpayer (direct debit only) | $31 | — |
| Low-income taxpayer (other methods) | — | $225 |
The IRS considers you low-income if your income is at or below 250% of the federal poverty line for your family size. You can find current poverty guidelines on the IRS website. Low-income taxpayers pay the same fees as anyone else, but they may be able to request a reduced monthly payment or have fees waived in hardship cases.
How to request a long-term payment plan
You have three ways to request a long-term installment agreement: online, by phone, or by mail.
Online: Go to IRS.gov and use the Online Payment Agreement tool. You will need your Social Security number or Individual Taxpayer Identification Number, your filing status, and the tax year(s) you owe for. You can choose your monthly payment amount and payment date. The IRS will tell you the setup fee and total interest you will pay. Approval usually happens within 24 hours.
By phone: Call the IRS at 1-800-829-1040. A representative will walk you through the process and help you choose a payment amount. You can authorize direct debit over the phone. Processing takes a few days.
By mail: Fill out Form 9465 (Installment Agreement Request) and send it with your tax bill or with your tax return if you are filing late. Include a check or money order for the setup fee. Mail it to the address shown in your tax notice. Processing takes 30 days or longer.
Direct debit versus other payment methods
The IRS charges less if you pay by direct debit—automatic withdrawal from your bank account each month. Direct debit costs $31 to set up (or $225 if you are not low-income and use another method). Direct debit also reduces the risk that you will miss a payment, which could end your plan and trigger collection action.
If you pay by check, money order, credit card, or debit card, the setup fee is $225 (or $31 if you are low-income and use direct debit). You can make payments online, by phone, or by mail. Credit card payments may carry a processing fee from the payment processor on top of the IRS fee.
You can switch from one payment method to another after your plan starts. If you move to direct debit later, the IRS may refund part of your setup fee—contact them to ask.
What happens to interest and penalties while you are on a plan
Interest and failure-to-pay penalties continue to accrue on your unpaid balance every month you are on a payment plan. The interest rate is set by the IRS each quarter and is currently around 8% per year (it changes). The failure-to-pay penalty is usually 0.5% of your unpaid tax per month, up to 25% total.
This means the longer your plan lasts, the more you will pay in total. A $5,000 debt paid over 60 months will cost significantly more than the same debt paid over 24 months because interest compounds. If you can pay faster, you will save money.
The IRS does not waive interest or penalties for taxpayers on payment plans. However, if you believe the IRS made an error in calculating your tax or penalty, you can file a protest or request an appeals conference.
What to do if you cannot make a payment
If you miss a payment or know you cannot make the next one, contact the IRS immediately. Do not wait for them to contact you. Call 1-800-829-1040 or go to IRS.gov to modify your plan.
The IRS can lower your monthly payment, extend your plan, or temporarily pause payments if you are in financial hardship. You may need to provide proof of hardship—recent pay stubs, bank statements, or a letter explaining your situation. Missing payments without notifying the IRS can end your plan and result in wage garnishment, bank levies, or a lien on your property.
If your plan ends, you have the right to request a new one. The IRS will charge another setup fee, but you can restart payments rather than face collection action.
State tax payment plans
Most states offer their own payment plans for state income tax debt. The rules, fees, and processes vary by state. Some states charge no setup fee, while others charge $25 to $100. Some allow plans up to 60 months; others go longer.
Contact your state tax agency directly to set up a state payment plan. You can usually find the phone number and online portal on your state's tax department website. You may be able to set up a federal plan and a state plan at the same time, but they are separate agreements with separate monthly payments.
Frequently Asked Questions
Can I set up a payment plan if I owe back taxes from multiple years?
Yes. You can include all tax years you owe in a single long-term installment agreement. The IRS will calculate your total debt and spread it across your chosen payment period. You will make one monthly payment that covers all years.
What if I cannot afford the minimum monthly payment the IRS suggests?
You can request a lower payment amount when you set up your plan or after it starts. The IRS will work with you to find an amount you can manage, though a lower payment means your plan will last longer and cost more in interest. If you are in severe hardship, you may be able to request a temporary pause in payments.
Do I need to file my tax return while I am on a payment plan?
Yes. You must continue to file your tax return on time every year, even if you are paying off a previous year's debt. Failing to file can end your payment plan and result in additional penalties.
Can I pay off my plan early without a penalty?
Yes. You can pay your remaining balance at any time without penalty. Paying early saves you interest. You do not need permission from the IRS to pay early.
What happens to my payment plan if I get a tax refund?
The IRS will automatically apply your refund to your payment plan balance. This reduces what you owe and can shorten your plan. You cannot choose to receive the refund instead—the law requires the IRS to use it against your debt.