How to Set Up a Payment Plan with the IRS
Few people enjoy paying taxes, but dealing with the IRS is a fact of life. Still, people sometimes find themselves owing more than they expect to or otherwise unable to pay their tax bill.
If you find that you can’t afford your tax bill, it’s in your best interest to set up a payment plan with the IRS. A payment plan can help you settle your tax debt and avoid prosecution and potential penalties for failing to pay your taxes.
On this page:
What is an IRS payment plan?
An IRS payment plan is an agreement that people make with the IRS to pay their taxes. Usually, when you file your tax return, you send the amount you owe with the return, but this isn’t possible if you can’t afford the bill. Payment plans let you spread the payments out over months or years.
There are a few different payment plans that you can set up, each with various features and pros and cons.
The three main types of plans are:
- Guaranteed installment agreement. If you owe $10,000 or less, the IRS will accept this agreement if you haven’t filed or paid late in the past five years, agree to pay on-time going forward, and agree to pay what you owe within three years.
- Partial payment installment agreement. These agreements let you settle your tax debt for less than what you owe. To qualify, you must owe more than $10,000, have no outstanding tax returns, have no bankruptcies, and show that you can’t afford to pay in full.
- Individual payment plan (short-term + long-term). Short-term payment plans are those that last for fewer than 120 days. There are no fees, but you must pay interest. Long-term plans last longer than 120 days and involve set up fees.
What are the fees for IRS payment plans?
Different types of IRS payment plans involve fees and other charges.
Short-term payment plans
Short-term IRS payment plans last for a maximum of 120 days and are only available to individual taxpayers. The benefit of these payment plans is that they don’t involve any setup fees or other charges. You only have to pay the penalty fees related to underpayment or late payment, if applicable, and interest.
Short-term plans are available to taxpayers who owe less than $100,000 in taxes, penalties, and interest.
Long-term payment plans
Long-term IRS payment plans are plans that take longer than 120 days to settle your tax debt. You have to pay a setup fee when establishing the plan. The cost of applying online is $37 if you plan to pay by direct debit. The fee is $149 if you plan to pay through other methods.
Applying through the mail or phone is more expensive. Low-income taxpayers can qualify for a full or partial waiver of the fee if their income is less than 250% of the federal poverty level.
These payment plans require that the taxpayer pay the setup fees, taxes owed, applicable penalties, and interest. They’re available to individuals who owe $50,000 or less in taxes.
What is the minimum monthly payment on an IRS installment agreement?
The amount that you must pay on your payment plan varies with your tax debt.
|Amount of tax debt||Minimum monthly payment|
|$10,000 or less||No minimum|
|$10,000 to $25,000||Total debt/72|
|$25,000 to $50,000||Total debt/72|
|Over $50,000||No minimum|
If you owe $10,000 or less
If you owe $10,000 or less in tax debt, then the IRS will usually automatically approve your payment plan. You have a fair amount of freedom in setting the terms of the plan. So long as it will take you less than three years to finish the plan, there is generally no minimum payment.
Remember that you still have to pay interest on your tax debt, so it makes sense to make larger monthly payments to reduce the interest you’ll have to pay.
If you owe $10,000 to $25,000
If you owe between $10,000 and $25,000, the IRS gives you six years to repay your tax debt. It also imposes a minimum monthly payment, though you’re free to pay more than the minimum if you want to pay your debt off sooner.
The minimum payment is equal to your debt, divided by seventy-two (the number of months in six years). Again, you have to pay interest, so larger payments can help you save money.
If you owe $25,000 to $50,000
If you owe at least $25,000 in tax debt, the IRS will want to keep a closer eye on your payment plan. You’ll have to provide more financial information when applying for the plan and fill out some additional forms.
Like payment plans for people owing between $10,000 and $25,000, you’ll have six years to finish the plan. That makes the minimum monthly payment equal to your balance divided by seventy-two.
If you owe over $50,000
If you owe more than $50,000 to the IRS, the IRS will want to work very closely with you when you propose a payment plan. This means examining detailed financial records, like your bank and brokerage statements.
Because every situation is unique, the IRS works directly with taxpayers who owe such large amounts. There are no one-size-fits-all payment plans, so the length of time you have to repay your tax debt, and the corresponding minimum payment will vary.
How to set up an IRS payment plan
The IRS understands that not everyone can quickly pay their tax bill, and one of its primary concerns is collecting the taxes it’s owed. The IRS is generally willing to work with people and makes setting up a payment plan as easy as possible.
If you owe less than $50,000 and want a long-term plan, you can apply for a repayment plan online. The same is true for short-term plans if you owe $100,000 or less.
To apply for an IRS payment plan, you must have the following information:
- E-mail address
- Address from most recently filed tax return
- Date of birth
- Filing status
- Your Social Security Number or Individual Tax ID Number (ITIN)
- Based on the type of agreement requested, you may also need the due balance amount
- To confirm your identity, you will need:
- Financial account number or
- the mobile phone registered in your name or
- activation code received by postal mail (takes 5 to 10 business days)
You can apply directly from the IRS website.
If you owe more than the maximum amount for applying online, you’ll need to reach out to the IRS directly.
By yourself vs. using a tax relief company
Dealing with the IRS can be stressful, so there are many tax relief companies that can help taxpayers deal with the IRS to set up payment plans and settle their tax debt.
Tax relief companies negotiate with the IRS on your behalf. All you have to do is hire the company and provide the information they request. They’ll handle things like figuring out the best payment plan, negotiating to settle your debt for less than you owe, and filing paperwork with the IRS.
These companies charge a fee for their services, usually a few hundred dollars, so it’s up to you whether the fees they charge are worth paying. If you have a small tax debt, it’s usually easy to set up a payment plan yourself.
If you want to work with a tax relief company, you can check out our picks for the best tax relief companies.
IRS payment plan FAQs
These are some questions that people commonly have about IRS payment agreements.
If you find yourself unable to pay your current taxes while you have an installment agreement with the IRS, you may add that tax debt to your current agreement. You cannot make a second, separate agreement.
Yes, the IRS accepts online payments.
The IRS accepts payment by direct debit, online or electronic transfer, check, money order, debit card, and credit card.
The IRS generally does not stop installment agreements, but you can apply to adjust or terminate the plan if you need to.
IRS installment plans do not affect your credit, and the IRS does not report them to any of the credit bureaus.
It typically takes between one to two months for the IRS to agree to a payment plan.
The Fresh Start Program lets taxpayers settle their tax debt for less than they owe, giving them a fresh start on paying their future taxes. People with tax debt can negotiate with the IRS to join this program and settle their debt more quickly.