How to Set Up an IRS Payment Plan

If you owe the IRS money and cannot pay the full amount right away, you can set up a payment plan — called an installment agreement — that lets you pay in smaller amounts over time. The IRS offers several types of plans depending on how much you owe and your situation. You can set one up online through the IRS website, by phone, or by mail, and the process usually takes a few days to a few weeks.

The key thing to understand is that setting up a plan does not erase what you owe or stop interest and penalties from growing. You will still pay more in total than if you paid in full when ready. But a plan keeps the IRS from taking more aggressive collection steps — like garnishing your wages or seizing your bank account — while you pay.

Key Takeaways

  • The IRS offers short-term plans (120 days or less) with no setup fee, and long-term plans (more than 120 days) with a setup fee that ranges from $31 to $225 depending on how you set it up.
  • You can set up a plan online at IRS.gov, by calling the IRS at 1-800-829-1040, or by mailing Form 9465 to the address on your tax notice.
  • The IRS will continue charging interest and penalties while you pay, so your total bill will grow each month.
  • If you miss a payment or fall behind on your plan, the IRS can cancel it and pursue other collection methods.
  • Your monthly payment amount depends on how much you owe and how long you want the plan to last.

The Two Main Types of Payment Plans

The IRS separates payment plans into two categories based on how long you need to pay. A short-term plan is for people who can pay off what they owe within 120 days. These plans have no setup fee, and you do not need to provide detailed financial information. You straightforward tell the IRS when you can pay in full, and they hold off collection efforts until that date.

A long-term plan (called a formal installment agreement) is for people who need more than 120 days to pay. These plans do have a setup fee and require you to provide information about your income and expenses. Long-term plans can last anywhere from a few months to six years, depending on how much you owe and what you can afford to pay each month.

Setup Fees and What They Cost

Short-term plans have no setup fee. Long-term plans charge a fee that depends on how you set up the plan. If you set it up online or by phone, the fee is $31. If you set it up by mail or in person, the fee is $225. Some people with low incomes may be able to pay a reduced fee of $31 even when setting up by mail — you can ask about this when you contact the IRS.

The setup fee is usually added to the amount you owe, so you pay it as part of your monthly installment rather than upfront. This means your first payment or your total bill will be slightly higher than if you had no fee.

How to Set Up Your Plan Online, by Phone, or by Mail

Online through IRS.gov: Go to IRS.gov and look for the Online Payment Agreement tool. You will need your Social Security number or Individual Taxpayer Identification Number, your date of birth, and your tax return information. You can set up either a short-term or long-term plan this way. The fee is $31 for long-term plans. This is usually the fastest method.

By phone: Call the IRS at 1-800-829-1040. A representative will ask you questions about your income, expenses, and how much you can pay each month. They will help you choose a plan type and set a payment amount. The fee is $31 for long-term plans. Wait times can be long, especially during tax season.

By mail: Fill out Form 9465 (Installment Agreement Request) and send it to the address shown on your tax notice or bill. Include a check or money order for the setup fee if you are setting up a long-term plan. Mail is the slowest method — it can take several weeks for the IRS to process your request. The fee is $225 unless you may have access to for a reduced fee.

What Information You Need to Have Ready

For a short-term plan, you need very little: your Social Security number, the tax year you owe for, and the date you can pay in full. For a long-term plan, you will need more details. Have your most recent tax return handy, along with information about your current monthly income and major expenses (rent or mortgage, utilities, food, childcare, transportation, medical costs).

If you are self-employed or have income from multiple sources, gather documentation showing what you earned in the past few months. The IRS uses this information to calculate how much you can reasonably pay each month. The more accurate your information, the more likely the IRS will approve the payment amount you request.

How Much Your Monthly Payment Will Be

Your monthly payment depends on three things: how much you owe, how long you want the plan to last, and what you can afford. If you owe $5,000 and want to pay it off in 12 months, your payment would be roughly $417 per month (before interest and penalties, which add to this amount each month). If you want to stretch it over 24 months, your payment would be roughly $208 per month.

When you set up your plan, you can propose a payment amount based on your budget. The IRS may accept it, or they may suggest a different amount based on their calculation of what you can afford. If you disagree with their calculation, you can request a review or ask for a different plan length. You do not have to accept the first offer.

What Happens After Your Plan Is Approved

Once your plan is approved, you will receive a notice from the IRS confirming the payment amount, due date, and how long the plan will last. Make your payments on time each month — you can pay by check, money order, electronic funds withdrawal (automatic deduction from your bank account), credit or debit card, or through the IRS payment system. If you pay by automatic withdrawal, the IRS may reduce your setup fee.

Interest and penalties continue to grow while you are on the plan. This means your total bill will be higher at the end than it was when you started. The longer your plan lasts, the more interest you will pay. If you can pay faster than your plan requires, you can send extra payments at any time without penalty.

What Happens If You Miss a Payment

If you miss a payment or pay late, the IRS will send you a notice. If you miss a payment by more than a few days, the IRS can cancel your plan and go back to collection efforts like wage garnishment or bank levies. However, if you contact the IRS quickly and explain why you missed the payment, they may give you a grace period or allow you to catch up.

If your financial situation changes and you can no longer afford your monthly payment, contact the IRS right away. You can request a modification to your plan — a lower payment amount or a longer plan length — rather than defaulting. The IRS would rather work with you than cancel the plan.

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 so the IRS knows exactly what you owe. If you have not filed, contact a tax professional or the IRS to file before setting up a plan. Filing late may result in additional penalties, but filing is the first step.

What if I owe less than $25,000?

You can set up a long-term plan for any amount you owe. However, if you owe less than $25,000, the IRS may encourage you to use a short-term plan or pay as much as possible upfront to reduce interest charges. A short-term plan has no fee and no financial disclosure requirement.

Can I change my payment amount or plan length after it is approved?

Yes. You can contact the IRS and request a modification if your situation changes. You may be able to lower your payment if money is tight, or increase it if you want to pay off the debt faster. There may be a small fee for modifying a plan.

Will a payment plan hurt my credit score?

A payment plan itself does not appear on your credit report. However, the original tax debt may have already been reported to credit bureaus before you set up the plan. Once you are on a plan and making payments, your credit can begin to improve over time.

What if I cannot afford any monthly payment right now?

Contact the IRS and explain your situation. You may be able to request a temporary delay (called currently not collectible status) while you get back on your feet. This pauses collection efforts for a time, though interest and penalties still grow. Once your situation improves, you can set up a payment plan.