Yes, you can set up a payment plan with the IRS if you owe taxes
The IRS offers payment plans (called installment agreements) that let you pay what you owe in monthly chunks instead of a lump sum. You do not have to wait for the IRS to contact you — you can request one yourself, online or by phone. The IRS will charge you a setup fee and interest on the unpaid balance, but a payment plan stops the IRS from taking collection action like wage garnishment or bank levy while you are making regular payments.
The key is that you must set up the plan before the IRS files a Notice of Federal Tax Lien against you, or very soon after. Once a lien is filed, the process becomes more complicated and the damage to your credit is already done. If you owe money, contacting the IRS to arrange payments now is faster and cheaper than waiting.
Key Takeaways
- You can request a payment plan online through IRS.gov, by phone at 1-800-829-1040, or by mail; online is fastest and requires no fee for most people.
- The IRS charges a setup fee (usually $31 to $225 depending on the method) and continues to charge interest on the unpaid balance until the debt is gone.
- A payment plan stops collection action like wage garnishment or bank levy, but does not erase the debt or reduce what you owe.
- Short-term plans (120 days or less) have no setup fee if you pay online; longer plans require a fee and monthly payments that fit your budget.
- You must make payments on time every month, or the plan can be cancelled and collection action can resume.
How to request a payment plan online
The fastest way is through the IRS Online Payment Agreement tool at IRS.gov. You will need your Social Security number or Individual Taxpayer Identification Number, your filing status, and the tax year(s) you owe for. The tool will show you available monthly payment amounts based on what you owe and how long you want to pay.
If you owe $50,000 or less in combined tax, penalties, and interest, you can set up a plan online with no phone call. The IRS will tell you the setup fee upfront — it is usually $31 if you pay by direct debit from your bank account, or $225 if you pay by credit card or other method. Once approved, your first payment is due about 30 days later.
If you owe more than $50,000, you will need to call the IRS at 1-800-829-1040 or work with a tax professional. The IRS also offers a Short-Term Extension (paying within 120 days) with no setup fee if you set it up online.
Payment plan options and what each costs
| Plan Type | Monthly Payment | Setup Fee | Who It Works For |
|---|---|---|---|
| Short-Term Extension (120 days or less) | You choose, based on what you owe | $0 if set up online | People who can pay off the debt quickly |
| Long-Term Installment Agreement (longer than 120 days) | $25 to $225+ per month, depending on debt size | $31 (direct debit) or $225 (other methods) | People who need 2+ years to pay |
| Streamlined Installment Agreement (under $50,000 owed) | Calculated by IRS based on your debt and timeframe | $31 (direct debit) or $225 (other methods) | Most people with moderate tax debt |
Interest and penalties continue to accrue on the unpaid balance every month. The IRS charges interest at a rate set quarterly (currently around 8% annually, but this changes). You will pay more total if you stretch payments over many years, but the monthly amount will be lower and more manageable.
What happens after you request a plan
If you request online, you usually get approval or denial within minutes. The IRS will send you a confirmation letter by mail within two weeks. Keep this letter — it shows you have an active plan and stops collection calls and notices during the approval period.
Your first payment is due about 30 days after approval. You can pay by direct debit (automatic withdrawal from your bank account), credit or debit card, or check. Direct debit is the cheapest option because the setup fee is lower, and you do not have to remember to pay each month.
If you miss a payment, the IRS will contact you. One missed payment does not automatically cancel the plan, but repeated missed payments will. If the plan is cancelled, the IRS can resume collection action, including wage garnishment or bank levy.
What a payment plan does and does not do
A payment plan stops the IRS from taking collection action while you are making on-time payments. It does not stop interest and penalties from growing, and it does not reduce the amount you owe. If the IRS has already filed a Notice of Federal Tax Lien, the lien stays on your credit report even after you finish paying — you will need to request a lien withdrawal separately after the debt is paid in full.
A payment plan also does not prevent the IRS from filing a lien in the future if you fall behind on payments. The plan is an agreement to pay, not a forgiveness of the debt.
Other options if a payment plan does not work
If your monthly payment would be too high, or if you cannot afford to pay the full amount even over several years, you may be able to request an Offer in Compromise — a settlement where you pay less than you owe. This is harder to get approved for and takes longer, but it can reduce your total debt. You can also request Currently Not Collectible status, which pauses collection action temporarily if you are in severe financial hardship, though interest keeps growing.
A tax professional or the IRS Taxpayer Advocate Service (a free office within the IRS that helps people in disputes) can help you explore these options. You can reach the Taxpayer Advocate Service at 1-877-777-4778.
Frequently Asked Questions
What if I cannot afford the monthly payment the IRS calculated?
Call the IRS at 1-800-829-1040 and ask to modify your plan. You can request a longer payment period (which lowers the monthly amount) or explore other options like Currently Not Collectible status. The IRS will not lower the amount you owe, but they can stretch the timeline.
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 what you owe. File as soon as you can, even if you cannot pay — filing stops additional penalties from growing. Then request a payment plan.
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 Notice of Federal Tax Lien before you set up the plan, that lien will show on your credit report and will hurt your score. Setting up a plan stops future liens but does not remove one that is already filed.
What if I pay off the plan early?
You can pay off the plan at any time without penalty. Send a check or pay online through IRS.gov and note that it is for your account. Paying early saves you interest.
Can I set up a payment plan for taxes from multiple years?
Yes. You can combine tax debt from different years into one payment plan. The IRS will calculate a single monthly payment that covers all of it.