Yes, the IRS lets you set up a payment plan if you owe taxes and cannot pay the full amount at once
The IRS calls this an installment agreement. It lets you pay what you owe in monthly chunks instead of one lump sum. The IRS will not forgive the debt, but they will let you spread payments over time — usually several years. You still owe interest and penalties on top of the original amount, and those accrue daily until you pay in full.
The process is straightforward: you tell the IRS how much you can pay each month, they approve or counter-offer, and you make those payments until the debt is gone. You can set this up online, by phone, or by mail. Most people use the online tool because it is faster and you get approval the same day.
Key Takeaways
- The IRS offers installment agreements that let you pay your tax debt in monthly payments instead of a lump sum.
- You can set up a plan online through IRS.gov, by phone at 1-800-829-1040, or by mailing Form 9465 to the IRS.
- The IRS charges a setup fee (usually $31 to $225 depending on your method) and continues to charge interest and penalties until you pay the full balance.
- Short-term plans (120 days or less) have no setup fee if you pay through automatic bank withdrawal.
- If you miss a payment, the agreement can be cancelled and the full balance becomes due immediately.
Three ways to set up an installment agreement
Online through IRS.gov is the fastest route for most people. Go to IRS.gov, search for "Online Payment Agreement," and you will land on a tool that walks you through the process. You enter your Social Security number, filing status, tax year, and how much you can pay each month. The system tells you instantly whether the IRS accepts your offer. Setup fee is $31 if you choose automatic bank withdrawal, $225 if you pay by check or money order. You get a confirmation number on the spot.
By phone takes longer but works if you prefer talking to a person. 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, the tax year you owe for, and the amount you can pay monthly ready. The IRS representative will propose a monthly payment and tell you the setup fee. If you agree, they will process it over the phone. Setup fee is $31 for automatic withdrawal, $225 otherwise.
By mail is the slowest option. Fill out Form 9465 (Installment Agreement Request), attach it to a copy of your tax notice, and mail it to the IRS address listed on your notice. Include a check or money order for the setup fee. Processing takes four to six weeks. You will receive written confirmation when the agreement is approved.
What the IRS needs from you before you apply
You must have filed a tax return for the year you owe, even if you did not pay. If you have not filed, you cannot set up a plan — you have to file first. The IRS will not let you make a deal on a debt they have not officially assessed.
You need to know the exact tax year and the amount you owe. This is on your tax notice (usually a CP14, CP501, or CP503 form). If you do not have the notice, you can look it up on IRS.gov using your login, or call 1-800-829-1040 and ask.
If you are setting up the plan online, you will need a bank account number and routing number for automatic withdrawal. This is optional but saves you money — automatic withdrawal reduces the setup fee from $225 to $31. If you pay by check or money order instead, you have to mail Form 9465 or call; the online tool does not accept that method.
How much you pay each month and how long the plan lasts
The IRS does not dictate your monthly payment. You propose an amount based on what you can actually afford, and the IRS either accepts it or counters. If you owe less than $50,000, you can usually stretch payments over five to six years. If you owe more, the IRS may require a longer term or a larger monthly payment.
The online tool shows you what your monthly payment would be for different timeframes. For example, if you owe $5,000 and choose a 60-month plan, the tool calculates roughly $83 per month (before interest and penalties). You can adjust the timeframe to see how the payment changes.
The IRS will not accept a plan if your monthly payment is so small that you will never pay off the debt. There is no official minimum, but if your payment does not cover the interest accruing each month, the IRS will push back. If you cannot afford even a small monthly payment, you may need to look into other options like an Offer in Compromise (a settlement for less than you owe) or Currently Not Collectible status (a temporary pause).
Interest, penalties, and what happens if you miss a payment
Interest accrues on your unpaid balance every single day at a rate set by the IRS quarterly. As of early 2024, the rate is 8 percent per year, but it changes. Penalties also continue to accrue — usually 0.5 percent of the unpaid balance per month for failure to pay. These stack on top of your original tax debt, so your total owed grows even as you make payments.
If you miss a payment, the IRS will send you a notice. You usually have a grace period of a few days, but if you miss the deadline in the notice, the installment agreement is cancelled. When that happens, the full remaining balance becomes due immediately. The IRS can then file a lien against your property or garnish your wages to collect.
If you know you will miss a payment, contact the IRS before the due date. You can request a short-term extension (usually 120 days) or ask to modify the agreement to a longer timeframe with a smaller monthly payment. Calling 1-800-829-1040 is faster than waiting for a notice.
Setup fees and what they cover
The setup fee is a one-time charge the IRS takes when you establish the plan. It ranges from $31 to $225 depending on how you set it up and how you pay.
| Method | Automatic Bank Withdrawal | Check or Money Order |
|---|---|---|
| Online | $31 | Not available online |
| Phone | $31 | $225 |
| Mail (Form 9465) | $31 | $225 |
| Short-term plan (120 days or less) | $0 | $0 |
The fee does not go toward your tax debt — it is pure cost. If you set up a short-term plan (you will pay off the debt in 120 days or less), there is no setup fee at all, regardless of payment method. This is worth considering if you expect a refund, bonus, or inheritance soon.
When an installment agreement might not work for you
If you owe more than $50,000, the IRS may require you to work with a revenue officer or set up a more formal agreement. You cannot use the online tool for debts over $50,000; you have to call or mail Form 9465.
If you have unpaid taxes from multiple years, you can roll them all into one installment agreement. However, if you have a history of not paying on time, the IRS may deny your request and demand full payment or pursue collection action.
If you are self-employed or own a business, the IRS may require you to provide financial statements or proof of income before approving a plan. This is more common if you owe a large amount or have missed payments in the past.
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, even if you cannot pay. The IRS will not let you make an installment agreement on a debt they have not officially assessed. Once you file, you can set up the plan immediately.
What happens to my payment plan if I get a refund next year?
The IRS will automatically apply your refund to your installment agreement balance. This reduces what you owe and speeds up the payoff. You cannot opt out of this — it is automatic. If you want to keep your refund, you would need to pay off the installment agreement in full before filing your next return.
Can I change my monthly payment amount after the plan is approved?
Yes. You can call 1-800-829-1040 or log into your IRS account online to request a modification. The IRS will either approve the new amount or counter-offer. If your financial situation improves, you can also pay more than the required amount without penalty — extra payments go straight to the principal.
Do I still owe penalties and interest while I am on a payment plan?
Yes. Interest and penalties continue to accrue daily until the debt is paid in full. This is why the longer your plan, the more total interest you will pay. A shorter plan costs less overall, but requires larger monthly payments.
What if I cannot afford any monthly payment right now?
An installment agreement may not be the right option. You can ask the IRS about Currently Not Collectible status, which temporarily pauses collection action while you get back on your feet. You can also explore an Offer in Compromise if you believe you cannot ever pay the full amount. Call 1-800-829-1040 to discuss your situation.