How to Set Up an IRS Payment Plan

The IRS offers installment agreements that let you pay what you owe in monthly chunks instead of a lump sum. You can set one up yourself online, by phone, or through the mail — the online route is fastest and requires no human contact. The IRS will tell you upfront what your monthly payment would be, and you can choose a plan that fits your budget before you commit.

The process takes minutes if you use the IRS website, or a few weeks if you mail in a form. Either way, you need to know the exact amount you owe, have a valid Social Security number or ITIN, and be able to provide a bank account for automatic withdrawals (most plans require this). The IRS charges a setup fee — usually $31 to $225 depending on which type of plan you choose and how you set it up.

Key Takeaways

  • The IRS Online Payment Agreement tool at IRS.gov lets you set up a plan in under five minutes without calling or mailing anything.
  • Monthly payments depend on how much you owe and how long you want the plan to last; shorter plans mean higher monthly payments.
  • The IRS charges a setup fee ($31 to $225) and may charge interest and penalties on top of your original tax debt until it is fully paid.
  • Automatic bank withdrawals are required for most plans, and missing a payment can cancel the agreement and trigger collection action.
  • If you cannot afford even a monthly plan, you can request a temporary delay (Currently Not Collectible status) or explore an offer in compromise.

Three Types of Payment Plans and Their Costs

The IRS offers three main installment agreement types, and which one you can use depends on how much you owe. A short-term extension is for balances under $100,000 and lets you pay in full within 180 days with no setup fee. This is the cheapest option if you can manage it, because you avoid the setup fee entirely.

A long-term installment agreement is for any balance and spreads payments over months or years. The setup fee is $31 if you set it up online, $225 if you set it up by phone or mail. You pay interest (currently around 8% per year, though this changes quarterly) and a failure-to-pay penalty (0.5% per month of unpaid tax) on top of your original debt until the plan is complete.

A streamlined installment agreement is available if you owe $50,000 or less and agree to automatic monthly withdrawals. The setup fee is $31, and the IRS will not contact you as often as they would under a regular plan. This is the path most people take because the lower fee and automatic payment reduce the IRS's collection costs.

Setting Up a Plan Online (Fastest Route)

Go to IRS.gov and search for "Online Payment Agreement." You will land on a tool that walks you through the process step by step. You will need your Social Security number or ITIN, your filing status, the tax year(s) you owe for, and your bank account number and routing number for automatic withdrawals.

The tool will show you the amount owed, calculate what your monthly payment would be at different plan lengths, and let you pick the one that works for you. You can choose a payment date between the 1st and 28th of each month. Once you confirm, the IRS generates an agreement number on the spot — you are done. The first payment usually comes due 30 days later.

This route works only if you owe $50,000 or less and have not had an installment agreement in the past five years. If you owe more or have a recent payment plan history, you will need to call or mail a form instead.

Calling the IRS or Mailing a Form

If you cannot use the online tool, call the IRS at 1-800-829-1040 (individual) or 1-800-829-4933 (business). Have your Social Security number, filing status, and bank account information ready. The IRS will verify your identity, confirm what you owe, and walk you through plan options. The call usually takes 20 to 30 minutes, and you will receive a written agreement in the mail within two weeks.

You can also mail Form 9465 (Installment Agreement Request) to the IRS address for your state. You will find the correct address on the form itself and on IRS.gov. Mail the form with a copy of your most recent tax return and a statement of your current financial situation if you are requesting a plan based on hardship. Processing takes four to six weeks by mail.

What Happens After You Set Up the Plan

Once your plan is active, the IRS will withdraw your monthly payment automatically from your bank account on the date you chose. You will receive a payment confirmation by mail or email (if you set it up online). Keep these confirmations — they prove you are current on the plan.

Interest and penalties continue to accrue on the unpaid balance until you pay it off completely. This means your total cost will be higher than the original tax bill. The IRS publishes its interest rate quarterly; as of early 2024 it is 8%, but this changes. You can pay more than your monthly minimum at any time without penalty, which will reduce the total interest you pay.

If you miss a payment, the IRS will send you a notice. One missed payment does not automatically cancel the plan, but if you miss two or more payments in a row, the IRS can terminate the agreement and resume collection action. If this happens, you can request reinstatement by calling the IRS or filing Form 9465 again.

If You Cannot Afford a Monthly Plan

If even a monthly payment is too much, you have two other paths. Currently Not Collectible (CNC) status temporarily pauses collection while you are in financial hardship. The IRS stops collection calls and wage garnishment, but interest and penalties keep accruing. CNC lasts up to 120 days and can be renewed, but eventually the IRS will resume collection efforts.

An offer in compromise lets you settle your tax debt for less than you owe if you can show the IRS that paying the full amount would cause genuine hardship. This is harder to get approved for than a payment plan, and the IRS charges a $225 application fee. You can request CNC or an offer in compromise by calling 1-800-829-1040 or mailing Form 656 (Offer in Compromise).

Frequently Asked Questions

Can I set up a payment plan if I have an active wage garnishment?

Yes. Setting up a payment plan does not automatically stop a wage garnishment, but you can request that the IRS release it once the plan is in place. Call 1-800-829-1040 and ask for the garnishment to be released. The IRS will consider it, especially if the plan covers the full debt within a reasonable time.

What if I cannot make a payment one month?

Contact the IRS immediately at 1-800-829-1040 before the payment date if possible. One late payment will not cancel the plan, but the IRS may charge a failure-to-pay penalty and interest will continue to accrue. If you miss two or more payments in a row, the plan can be terminated and collection action will resume.

Can I change my monthly payment amount after the plan starts?

Yes. Call the IRS at 1-800-829-1040 and request a modification. You can increase your payment to pay off the debt faster, or request a lower payment if your financial situation has changed. The IRS will review your request and issue a new agreement if approved.

Do I still owe penalties and interest while on a payment plan?

Yes. Interest accrues at the IRS's quarterly rate (currently 8%) on the unpaid balance, and the failure-to-pay penalty (0.5% per month) continues until the debt is fully paid. Paying more than your monthly minimum will reduce the total interest you owe.

What if I pay off the plan early?

You can pay the remaining balance at any time without penalty. The IRS will stop charging interest once the balance reaches zero. Send a check or money order to the IRS address for your state, or pay online through IRS.gov using your agreement number.