Yes, the IRS offers payment plans for taxes you owe
If you owe the IRS money and cannot pay the full amount right away, the IRS will let you pay in installments instead of all at once. These are called payment plans or installment agreements. The IRS sets this up directly with you — there is no separate lender or company involved. You pay the IRS on a schedule you both agree to, usually monthly.
The catch is that you still owe interest and penalties on top of what you owe, and those grow while you are paying. But a payment plan stops the IRS from taking more aggressive action like seizing your bank account or wages while you are making regular payments.
Key Takeaways
- The IRS offers payment plans directly to people who owe taxes, with monthly payments you can usually choose yourself.
- You can set up a payment plan online through IRS.gov, by phone at 1-800-829-1040, or by mail, and the process takes a few days to a few weeks.
- Short-term plans (120 days or less) have no setup fee, but longer plans charge a fee that varies based on how you set up the plan.
- Interest and penalties keep growing while you pay, so paying faster saves you money even if you have to stretch your budget to do it.
- If your circumstances change and you cannot make a payment, contact the IRS right away rather than missing a payment, because missing payments can end the plan.
The three types of IRS payment plans
The IRS offers three main payment plan types, and which one you can use depends on how much you owe.
A short-term payment plan lets you pay off what you owe within 120 days. There is no setup fee. This is the fastest and cheapest option if you can manage it, because you stop paying interest sooner.
A long-term installment agreement spreads payments over more than 120 days, sometimes for years. The IRS charges a setup fee (usually between $31 and $225 depending on how you set it up) and you pay interest the whole time. Most people use this type when they owe more than they can pay back in four months.
A streamlined installment agreement is available if you owe $50,000 or less in combined taxes, penalties, and interest. It has a lower setup fee than a regular long-term plan and fewer requirements — you do not have to provide as much financial information. The payments are usually fixed and automatic.
How to set up a payment plan with the IRS
You can start a payment plan in three ways: online, by phone, or by mail. Online is usually fastest.
Online through IRS.gov: Go to IRS.gov and search for "Online Payment Agreement." You will answer questions about how much you owe, how much you can pay each month, and when you want payments to start. The system will tell you right away if you are approved. You can set up automatic payments from your bank account (called a direct debit) at the same time, which lowers your setup fee. This usually takes a few minutes, and you get a confirmation number when ready.
By phone: Call the IRS at 1-800-829-1040. A representative will walk you through the same questions and set up the plan over the phone. This takes longer than online but can be helpful if you have questions. The IRS is usually busiest in the morning and during tax season (January through April).
By mail: Fill out Form 9465 (Installment Agreement Request) and mail it with your tax bill or notice. Include a check or money order for your first payment if you can. Mail it to the address on your tax notice. This takes the longest — usually two to four weeks — because the IRS has to receive and process the form by hand.
What the IRS needs from you
The information you need depends on which type of plan you are setting up. For a streamlined plan, the IRS asks very little — usually just your income and expenses to confirm you can make the payments.
For a regular long-term plan, the IRS may ask for a financial statement showing your income, debts, and monthly expenses. This helps them decide whether the payment amount you proposed is realistic. If you owe more than $25,000, the IRS is more likely to ask for this information.
You will always need your Social Security number or tax ID, the tax year you owe for, and the total amount you owe. If you are setting up the plan by mail, you will also need to include a copy of your most recent tax notice from the IRS.
Setup fees and how much they cost
The IRS charges a one-time setup fee when you start a long-term plan. The fee depends on how you set it up:
| How you set up the plan | Setup fee |
|---|---|
| Online with direct debit (automatic bank payments) | $31 |
| Online without direct debit | $225 |
| By phone with direct debit | $225 |
| By phone without direct debit | $225 |
| By mail | $225 |
The IRS usually adds the setup fee to your first payment or spreads it across your payments. Short-term plans (120 days or less) have no setup fee at all.
Beyond the setup fee, you pay interest on what you owe. The IRS interest rate changes every three months and is currently in the range of 8 to 9 percent per year, though this varies. You also keep paying any penalties that were added to your bill. Both interest and penalties grow while you are paying, so the longer your plan lasts, the more you pay overall.
What happens after you set up the plan
Once your plan is approved, you will get a notice from the IRS with your agreement details: the amount of each payment, the due date, and how long the plan lasts. Keep this notice. You will need it if you have questions or if your situation changes.
Make your payments on time every month. You can pay by direct debit (automatic), by check, by credit or debit card through a third-party processor (which charges a fee), or by electronic federal tax payment system (EFTPS). The IRS website shows all the payment methods.
If you cannot make a payment, call the IRS right away at 1-800-829-1040. Do not skip the payment and hope they do not notice — missing payments can end your plan, and the IRS can then take collection action. If your income changes or you face a hardship, the IRS may be able to adjust your payment amount or give you a temporary pause.
When a payment plan might not be your best option
A payment plan works well if you owe a moderate amount and can afford monthly payments. But if you owe a very large amount and cannot afford meaningful monthly payments, the IRS may not approve a plan that stretches too long.
If you are in serious financial hardship — meaning you cannot pay basic living expenses — you may want to look into currently not collectible status instead. This temporarily pauses collection while you get back on your feet, though interest and penalties still grow. Or if you owe a very large amount, you might explore an Offer in Compromise, which lets you settle for less than you owe if you meet strict requirements. These are different paths that the IRS offers, and a tax professional can help you figure out which makes sense for your situation.
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 on time (or getting an extension) stops penalties from growing as fast. Once you file, you can set up a payment plan for what you owe.
What if I pay off my plan early?
You can pay off the plan early without penalty. Paying early saves you interest, since interest stops accruing once the balance is zero. There is no fee for paying early.
Does setting up a payment plan affect my credit score?
A payment plan itself does not show up on your credit report. However, if the IRS filed a tax lien (a legal claim against your property) before you set up the plan, that lien stays on your credit report. Setting up the plan does not remove the lien, though the IRS may release it once you have paid in full.
Can I change my payment amount after the plan starts?
Yes. If your income changes or you face a hardship, contact the IRS and ask to modify your plan. You can usually increase or decrease your payment amount, or ask for a temporary pause. Call 1-800-829-1040 or log into your IRS account online.
What happens if I miss a payment?
Missing a payment can end your plan. The IRS will send you a notice. Contact them right away to explain what happened — they may reinstate the plan or work out a new arrangement. If you do not respond, the IRS can resume collection action like wage garnishment or bank levies.