The IRS will let you pay taxes you owe over time instead of in one lump sum, but you have to request it and meet their terms

If you owe the IRS money and cannot pay it all at once, you can set up an installment agreement — a formal payment plan where you pay a fixed amount each month until your debt is settled. The IRS offers several types of plans depending on how much you owe and your financial situation. You do not need to wait for the IRS to contact you; you can request a plan as soon as you know you will owe money, or even after you receive a bill.

The key is that the IRS charges interest and penalties on unpaid taxes, and these grow every day. A payment plan stops some of the penalties from accruing, but interest continues. Setting up a plan early — ideally before the tax deadline or as soon as you receive a notice — keeps your total debt from ballooning and gives you time to arrange the payments without the IRS filing a lien against your property.

Key Takeaways

  • You can request an installment agreement online through IRS.gov, by phone at 1-800-829-1040, or by mail using Form 9465.
  • The IRS charges a setup fee (usually $31 to $225 depending on the method and plan type) and continues to charge interest on the unpaid balance each month.
  • Short-term payment plans (120 days or less) have no setup fee, while long-term plans require one and monthly payments that the IRS calculates based on what you owe.
  • If you miss a payment, the agreement can be cancelled and the IRS may pursue collection action, so you must be able to commit to the monthly amount.
  • You can modify or pay off your plan early without penalty, and the IRS will work with you if your financial situation changes.

The three types of payment plans the IRS offers

The IRS has three main installment agreement options, and which one you can use depends on how much you owe. A short-term payment plan covers balances under $100,000 and gives you up to 120 days to pay. There is no setup fee, no monthly payment requirement, and you can arrange it entirely online or by phone. This is the fastest and cheapest route if you can pay within four months.

A long-term installment agreement is for balances of any size and spreads payments over months or years. The IRS calculates your monthly payment based on your total debt, and you pay a setup fee ranging from $31 to $225 depending on whether you set it up online (cheaper) or by mail or phone (more expensive). Most people with significant tax debt use this type.

A streamlined installment agreement is available if you owe $50,000 or less in combined income tax, penalties, and interest. It requires less financial information than a standard long-term plan, has a lower setup fee, and can be set up online quickly. The IRS will calculate a payment amount, but you can request a different one if you cannot afford it.

How to request a payment plan online

The fastest way to set up a plan is through the IRS Online Payment Agreement tool at IRS.gov. Go to the IRS website, find the "Payments" section, and look for "Set Up a Payment Plan." You will need your Social Security number, date of birth, filing status, and the tax year(s) you owe for. You will also need to know your total balance or have your most recent IRS notice handy.

The tool will ask you to choose between a short-term plan (if your balance qualifies) or a long-term plan. If you choose long-term, you can either accept the IRS's calculated monthly payment or request a lower amount. If you request lower payments, the IRS will review your request and may ask for financial information to verify you cannot afford the standard amount. Once approved, you will receive a confirmation number and details about when your first payment is due.

Online setup is available 24/7 and is the cheapest option — the setup fee is $31 for a long-term agreement set up this way. You can pay by direct debit from your bank account, credit card, or debit card, though credit and debit card payments include a processing fee charged by the payment processor, not the IRS.

Setting up a plan by phone or mail if online is not an option

If you cannot use the online tool, you can call the IRS at 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, filing status, and tax year ready. A representative will walk you through the plan options and calculate your payment. The setup fee for a phone agreement is $225 for a long-term plan.

You can also request a plan by mail using Form 9465 (Installment Agreement Request). Print the form, fill it out with your tax information and the monthly payment you are proposing, and mail it to the IRS address shown in your tax notice. Include a copy of your notice with the form. Mail processing takes longer — typically four to six weeks — but the setup fee is the same as phone ($225 for long-term).

If you are unable to pay even a modest monthly amount, you can request a plan with payments as low as $25 per month on Form 9465, though the IRS may ask for proof of financial hardship. The lower your payment, the longer your plan will run and the more interest you will pay overall.

What happens after you are approved

Once your plan is approved, you will receive a notice from the IRS confirming the monthly payment amount, the due date each month, and the expected payoff date. Your first payment is usually due 20 to 30 days after approval. You must make every payment on time; missing even one can result in the agreement being cancelled, and the IRS can then pursue collection action such as wage garnishment or a bank levy.

You can make payments online through IRS.gov, by phone, by mail, or through automatic bank debit (which is the most reliable method and ensures you never miss a payment). If you set up direct debit when you establish the plan, the IRS will deduct the payment from your account on the same date each month.

Interest and penalties continue to accrue on your unpaid balance throughout the plan. The IRS charges interest at a rate set quarterly (currently around 8% annually, though this varies), plus a failure-to-pay penalty of 0.5% per month on the unpaid amount. These are added to your balance, which means your total debt grows even as you make payments. This is why paying off the plan as quickly as you can afford to is in your interest.

Modifying your plan if your situation changes

If you get a raise or come into money, you can pay off your plan early without penalty. Simply send a lump-sum payment to the IRS, and your plan will end. If your financial situation worsens and you cannot afford your monthly payment, you can request a modification. Contact the IRS at 1-800-829-1040 or log into your account on IRS.gov to request a lower payment or an extension of the plan.

The IRS will review your request and may ask for updated financial information. They may lower your payment, extend your plan timeline, or in rare cases place your account in "currently not collectible" status temporarily, which pauses collection action while you recover financially. However, interest and penalties continue to accrue even during a pause, so this is a temporary measure, not a permanent solution.

If you miss a payment and the IRS cancels your agreement, you can request a new one. However, repeated missed payments may result in the IRS pursuing other collection methods before approving another plan.

Fees, interest, and the true cost of a payment plan

The setup fee is not the only cost. The IRS charges interest on your unpaid balance from the original tax deadline until you pay in full. Interest accrues daily and is compounded, meaning you pay interest on interest. On top of interest, the IRS charges penalties: a failure-to-pay penalty of 0.5% per month (up to 25% total) and potentially a failure-to-file penalty if you did not file a return.

For example, if you owe $5,000 and set up a 24-month plan with a $220 monthly payment, you will pay roughly $5,280 in payments plus interest and penalties that could add another $800 to $1,200 depending on interest rates and how long the plan runs. The longer your plan, the more interest you pay. This is why paying as much as you can afford upfront, or requesting the shortest possible plan timeline, saves you money.

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. Filing establishes what you actually owe. If you file late, you will owe a failure-to-file penalty on top of the tax and interest, but filing is still the first step. Once your return is filed and processed, you can request a payment plan.

What if I cannot afford any monthly payment?

Contact the IRS and explain your situation. You may be placed in "currently not collectible" status, which temporarily pauses collection action. However, interest and penalties continue to accrue, and the IRS will resume collection efforts once your financial situation improves. This is not forgiveness; it is a temporary pause.

Will a payment plan stop the IRS from garnishing my wages or levying my bank account?

A payment plan stops most collection action once it is approved and active. However, if you miss payments and the plan is cancelled, the IRS can resume garnishment or levy. If the IRS has already started collection action before you request a plan, contact them immediately — approving a plan may stop the action, but you need to act quickly.

Can I change my payment plan after it is set up?

Yes. You can request a lower payment, a longer timeline, or pay off the plan early. Contact the IRS at 1-800-829-1040 or use your online account to request a modification. The IRS will review your request and may ask for financial information to support it.

What if I pay off my plan early?

There is no penalty for paying off early. You can send a lump-sum payment at any time, and your plan will end. You will still owe any interest and penalties that have accrued, but you will stop accruing new interest once the balance is paid in full.