How to set up an IRS payment plan

The IRS lets you pay your tax debt over time through a payment plan, also called an installment agreement. You can request one online, by phone, or by mail — the online route is fastest and requires no paperwork. The IRS will tell you within minutes whether your request is accepted. You'll owe interest and a setup fee on top of your original debt, but the monthly payment will be smaller than paying everything at once.

The IRS has two main types of plans: short-term (120 days or less) and long-term (more than 120 days). Short-term plans have no setup fee. Long-term plans charge a fee that ranges from $31 to $225 depending on how you set it up and your income level. You can choose how much to pay each month, as long as your plan clears the debt within six years for most taxpayers.

Before you request a plan, gather your tax return, your Social Security number, and information about your income and expenses. The IRS uses this to decide whether to accept your request and what monthly payment they'll suggest.

Key Takeaways

  • You can request a payment plan online at IRS.gov, by phone at 1-800-829-1040, or by mail using Form 9465, and the online method gives you an answer within minutes.
  • Short-term plans (120 days or less) have no setup fee, while long-term plans charge $31 to $225 depending on your income and how you apply.
  • You choose your monthly payment amount as long as the plan pays off your debt within six years, though the IRS will suggest a minimum based on what you owe.
  • Interest and penalties continue to accrue on your unpaid balance, so the longer your plan runs, the more you'll pay in total.
  • If your financial situation improves, you can pay off the plan early without penalty, and if it worsens, you can request a modification.

Requesting a payment plan online

The fastest way to set up a plan is through the IRS Online Payment Agreement tool at IRS.gov. You'll need your Social Security number, date of birth, and the amount you owe. The tool asks about your income and monthly expenses, then shows you payment options and the total cost of each plan. You get a decision immediately and can start paying within days.

Online requests work best if you owe $50,000 or less in combined income tax, penalties, and interest. If you owe more, you can still use the tool, but the IRS may ask for additional financial information before accepting your request. The online tool also lets you set up automatic monthly payments from your bank account, which reduces your setup fee by $225.

After you submit your request online, the IRS sends you a confirmation notice by mail. Keep this notice — it shows your plan number, monthly payment amount, and due date. If the IRS rejects your request, the notice explains why and tells you how to appeal or try a different approach.

Requesting a payment plan by phone or mail

You can call the IRS at 1-800-829-1040 to request a payment plan. A representative will ask the same questions as the online tool and tell you whether your request is accepted. Phone requests take longer than online — you may wait on hold, and you won't know the outcome immediately. However, a representative can answer questions about your specific situation and may be able to work with you if you've had trouble with the IRS before.

To request by mail, fill out Form 9465 (Installment Agreement Request) and send it with your tax return or separately to the IRS address shown in your notice. Include a check or money order for the setup fee if you're paying by mail. The IRS processes mail requests in the order received, which can take four to six weeks. During that time, the IRS may still send collection notices, so don't assume your request has been accepted until you receive written confirmation.

If you're self-employed or have a more complex tax situation, requesting by phone or mail may be better because you can explain your circumstances to a person rather than filling out a form.

What happens after your plan is approved

Once your plan is approved, you'll receive a notice from the IRS showing your monthly payment amount, due date, and plan number. You can pay by automatic bank withdrawal, credit or debit card, check, or money order. Automatic withdrawal is the easiest method and reduces your setup fee.

Your monthly payment goes toward your original tax debt first, then toward penalties and interest. Interest continues to accrue on your unpaid balance at the IRS rate (currently around 8 percent per year, though this changes quarterly). Penalties also continue until your debt is paid in full. This means your total cost will be higher than if you paid everything at once, but the monthly payment is manageable.

If you miss a payment, the IRS may send you a notice and charge a late fee. If you miss three payments in a row, the IRS can cancel your plan and demand full payment. If your financial situation changes and you can't afford your monthly payment, contact the IRS before you miss a payment — you can request a modification to lower your monthly amount or extend your plan.

Modifying or ending your payment plan

If your income increases and you can afford larger payments, you can pay off your plan early without penalty. Simply send extra money with your regular payment or pay a lump sum whenever you're able. The IRS will apply the extra money to your debt and reduce the interest you owe.

If your income decreases or unexpected expenses arise, you can request a modification to lower your monthly payment or extend your plan. Contact the IRS at 1-800-829-1040 or log into your online account at IRS.gov to request a change. The IRS will review your current income and expenses and may approve a lower payment. However, extending your plan means paying more interest over time.

If you fail to pay three consecutive months, the IRS will cancel your plan and send you a notice demanding full payment. You can request reinstatement of your plan if you pay the missed amount and explain why you missed the payments. If the IRS denies reinstatement, you can appeal or request a new plan.

Understanding the cost of a payment plan

A payment plan costs more than paying your tax bill in full because of interest and setup fees. The setup fee ranges from $31 (if you pay by automatic withdrawal and owe $25,000 or less) to $225 (if you pay by check or money order). Interest accrues daily on your unpaid balance at a rate set by the IRS each quarter — it's currently around 8 percent per year, but check IRS.gov for the current rate.

For example, if you owe $5,000 and set up a 36-month plan with automatic payments, your setup fee is $31 and your interest will add roughly $600 to $800 to your total cost, depending on the exact interest rate. Your monthly payment would be around $160. If you could pay the full $5,000 at once, you'd save the setup fee and interest.

However, if paying in full would create a hardship — leaving you unable to pay rent, utilities, or other essential expenses — a payment plan is worth the extra cost. The IRS prefers a payment plan to wage garnishment or bank levy, which are more disruptive to your life.

When a payment plan may not be approved

The IRS will reject your payment plan request if you haven't filed all required tax returns for the past six years, or if you're currently in bankruptcy. You must file any missing returns before the IRS will consider a plan. If you're in bankruptcy, the IRS cannot collect from you until your bankruptcy case is resolved.

The IRS may also reject your request if you owe more than $250,000 and haven't provided detailed financial information. In this case, you can still request a plan by phone or mail and provide additional documentation of your income and expenses. The IRS may require you to provide updated financial information every two years to keep your plan active.

If your request is rejected, the notice explains the reason and tells you how to respond. You can provide additional information, request a hearing, or appeal the decision. If you disagree with the IRS's decision, you have the right to request an appeal through the IRS Office of Appeals.

Frequently Asked Questions

Can I set up a payment plan if I owe penalties and interest, not just the original tax?

Yes. Your payment plan covers your original tax debt, penalties, and interest all together. Interest and penalties continue to accrue on your unpaid balance while you're on the plan, so the longer your plan runs, the more you'll owe in total. However, the monthly payment is lower because you're spreading the cost over time.

What if I can't afford the IRS's suggested monthly payment?

You can propose a lower monthly payment when you request your plan, as long as it will pay off your debt within six years. The IRS will review your income and expenses and decide whether to accept your offer. If they reject it, you can request a hearing or appeal. You can also request a modification later if your circumstances change.

Do I have to make my payment on a specific date each month?

Yes. Your payment is due on the date shown in your approval notice, usually the 15th or 28th of each month. If you set up automatic withdrawal, the IRS withdraws the payment on that date. If you pay by check or money order, mail it early enough to arrive by the due date. Late payments may result in additional fees and could cause the IRS to cancel your plan.

What happens to my payment plan if I get a refund?

The IRS will apply your refund to your payment plan debt automatically. This reduces the amount you still owe and may shorten your plan or lower your monthly payment. The IRS will send you a notice showing how your refund was applied. If you want to keep your refund instead, you must contact the IRS before filing your return to request an exception, though this is rarely granted.

Can I cancel my payment plan if I change my mind?

Yes, you can pay off your plan at any time without penalty. Simply send a lump-sum payment to the IRS address shown in your approval notice. The IRS will apply the payment to your debt and close your plan. However, you'll still owe any interest and penalties that have accrued up to that point.