How to Set Up a Payment Plan With the IRS

How to set up an IRS payment plan

You can set up an IRS payment plan by contacting the IRS directly through their website, by phone, or by mail. The IRS offers two main types of plans: a short-term extension (up to 180 days to pay in full) and an installment agreement (monthly payments over a longer period). Most people use the IRS website at irs.gov to set up a plan online without calling, which takes about 15 minutes. If you owe less than $50,000 in taxes, penalties, and interest combined, you can set up a plan yourself. If you owe more, or if you prefer to work with someone, you can call the IRS or work with a tax professional.

The sooner you contact the IRS about a plan, the better. The IRS charges penalties and interest every day you don't pay, and those charges grow faster if you ignore the debt. Setting up a plan stops some of the penalty growth and shows the IRS you are taking the situation seriously.

Key Takeaways

You can set up most payment plans online at irs.gov without calling or mailing anything, and the process takes about 15 minutes.
A short-term extension gives you up to 180 days to pay the full amount, while an installment agreement spreads payments over months or years with a monthly fee.
The IRS charges a setup fee (usually $31 to $225 depending on the plan type) and interest on the unpaid balance, so the total you pay will be more than the original debt.
If you cannot pay the monthly amount the IRS suggests, you can request a lower payment or ask for a temporary pause, though the debt will take longer to clear.
Setting up a plan before the IRS contacts you about collection action protects you from wage garnishment, bank levies, and liens on your property.

The difference between a short-term extension and an installment agreement

A short-term extension gives you up to 180 days to pay the full amount you owe without making monthly payments. You pay nothing during those 180 days except interest and any penalties the IRS has already charged. This plan works if you expect to have the money in the next few months — for example, if you are waiting for a bonus, a tax refund, or the sale of property. There is no setup fee for a short-term extension.

An installment agreement lets you pay the debt in monthly installments over time. The IRS charges a setup fee (usually $31 to $225, depending on whether you set it up online or by phone) and continues to charge interest on the unpaid balance each month. You pay the same amount each month until the debt is gone. This plan works if you need to spread the payments across your regular budget. Most people use an installment agreement because they cannot pay the full amount within six months.

Setting up a plan online at irs.gov

The fastest way to set up a plan is through the IRS Online Payment Agreement tool at irs.gov. You will need your Social Security number or Individual Taxpayer Identification Number (ITIN), your filing status, and the tax year for the debt you are paying. The tool will ask you to confirm the amount you owe and choose between a short-term extension and an installment agreement.

If you choose an installment agreement, the tool will suggest a monthly payment amount based on what you owe and how long you want to take to pay it. You can accept the suggestion or request a lower amount. The IRS will then ask for a bank account number so they can set up automatic monthly withdrawals. Once you submit, you will receive a confirmation number when ready and a formal agreement by mail within two weeks.

The online tool works for most people, but you cannot use it if you owe more than $50,000, if you are a business owner with unpaid payroll taxes, or if the IRS has already filed a lien against your property. In those cases, you will need to call the IRS or work with a tax professional.

Calling the IRS to set up a plan

If you prefer to speak with someone or cannot use the online tool, you can call the IRS at 1-800-829-1040. Have your Social Security number, filing status, and the tax year ready. The IRS representative will verify your identity, confirm the amount you owe, and walk you through the plan options. The call usually takes 20 to 30 minutes.

When you call, the IRS may ask why you cannot pay the full amount and whether you have tried to borrow money. Be honest. If you say you have no money at all, the IRS may offer a Currently Not Collectible status, which pauses collection action for a time while interest and penalties continue to grow. This is a temporary measure, not a forgiveness of the debt.

The IRS is often busy, and wait times can be long, especially during tax season. If you reach a representative, they can set up your plan when ready, but you will still receive the formal agreement by mail.

What happens after you set up a plan

Once your plan is approved, the IRS will send you a formal agreement by mail that shows the monthly payment amount, the due date each month, and the total interest and fees you will pay. Keep this letter. If you set up automatic withdrawals from your bank account, the IRS will deduct the payment on the same day each month. If you chose to pay by check or money order, you will mail the payment to the address on the agreement.

While you are on a payment plan, the IRS will not pursue collection action like wage garnishment or bank levies. However, interest and penalties continue to grow on the unpaid balance. If you miss a payment, the IRS may cancel the plan and resume collection action, so it is important to make payments on time.

If your financial situation changes and you cannot make the monthly payment, contact the IRS before you miss a payment. You can request a lower payment amount, ask for a temporary pause, or switch to a different plan type. The sooner you contact them, the more options you have.

Fees and interest you will pay

The IRS charges a setup fee when you create an installment agreement. If you set up the plan online, the fee is usually $31. If you call the IRS or set up a plan by mail, the fee is usually $225. A short-term extension has no setup fee.

In addition to the setup fee, the IRS charges interest on the unpaid balance. The interest rate changes quarterly and is based on the federal short-term rate plus 3 percent. As of early 2024, the rate is around 8 percent per year, but this varies. Interest is calculated daily and added to your balance each month, so the longer you take to pay, the more interest you will owe.

The IRS also charges a failure-to-pay penalty of 0.5 percent of the unpaid balance each month, though this penalty is reduced to 0.25 percent while you are on a payment plan. This means the total cost of your debt grows every month until it is paid off.

If you cannot afford the monthly payment

If the IRS suggests a monthly payment you cannot afford, you can request a lower amount. When you set up your plan online or call the IRS, you can enter a different payment amount. The IRS will accept lower payments, but the debt will take longer to pay off and you will pay more interest overall.

If you truly have no money to pay anything right now, you can ask for Currently Not Collectible status. This pauses collection action for up to two years while you get back on your feet. The debt does not go away — interest and penalties continue to grow — but the IRS will not garnish your wages or levy your bank account. After two years, the IRS will contact you again to see if your situation has improved.

Another option is a temporary delay, which pauses your payments for a set period (usually three to six months) while you handle an emergency. You will still owe the debt, and interest will continue to grow, but you get breathing room.

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 your return before setting up a plan. Filing late adds penalties, so do this as soon as you can.

What if I miss a payment on my plan?

Contact the IRS when ready. If you miss one payment, the IRS may cancel your plan and resume collection action. However, if you contact them before or shortly after missing a payment, you can usually get the plan reinstated or adjusted. Do not ignore the missed payment.

Can I pay off my plan early without a penalty?

Yes. You can pay the full remaining balance at any time without penalty. Paying early saves you interest, since interest stops accruing once the debt is paid. There is no fee for early payment.

Will a payment plan affect my credit score?

A payment plan itself does not appear on your credit report. However, the original unpaid tax debt may have already been reported to credit bureaus, and that will affect your score. Setting up a plan does not remove the past damage, but it stops future damage from collection action.

What if my income changes and I can no longer afford my monthly payment?

Contact the IRS and explain your situation. You can request a lower monthly payment, ask for a temporary pause, or switch to Currently Not Collectible status. The IRS prefers to work with you rather than pursue collection action, so reach out before you miss a payment.

This guide is for general information only and is not medical, financial, legal, or other professional advice. For decisions specific to your situation, consult a qualified professional. See our Editorial Policy.