How to Set Up a Payment Plan With the IRS

Yes, you can make a payment plan with the IRS if you owe taxes

The IRS calls a payment plan an installment agreement. It lets you pay what you owe in monthly chunks instead of one lump sum. The IRS offers several types, depending on how much you owe and whether you want to set it up yourself or have the IRS do it for you.

The basic idea is straightforward: you owe money, you can't pay it all at once, and the IRS would rather get monthly payments than nothing. But there are rules about which plan you can use, how much it costs to set one up, and what happens if you miss a payment.

Key Takeaways

The IRS offers short-term plans (120 days or less) with no setup fee, and long-term plans (more than 120 days) that charge a setup fee between $31 and $225 depending on how you set it up.
You can set up a plan yourself through IRS.gov, by phone at 1-800-829-1040, or by mail using Form 9465, and the method you choose affects the fee you pay.
Monthly payments depend on how much you owe and how long you want the plan to last — the IRS will calculate this for you based on what you tell them.
If you miss a payment or don't file future tax returns on time, the IRS can cancel your plan and demand the full amount when ready.
Interest and penalties keep adding to what you owe while you're on a payment plan, so the longer the plan lasts, the more you'll pay in total.

The two main types of payment plans

A short-term plan covers 120 days or less. You don't pay a setup fee. This works if you're close to being able to pay the full amount — you just need a few months to gather the money. The IRS will contact you about payment details, usually by mail.

A long-term plan (called an installment agreement) lasts more than 120 days. You pay a setup fee, which ranges from $31 to $225 depending on how you set it up. If you set it up online through IRS.gov, the fee is lower ($31 to $225 depending on your income). If you call or mail in a form, the fee is higher. Once approved, you make the same monthly payment each month until the debt is paid.

How much the setup costs and what affects the fee

Setup fees vary based on your income and how you set up the plan. If you set up a long-term plan online and have your payment automatically deducted from your bank account each month, the fee is $31. If you set it up online but pay by check or other method, it's $225. If you call the IRS or mail in Form 9465, the fee is also $225.

There is one exception: if your income is below a certain threshold (this changes yearly), you may pay only $31 even if you call or mail in your request. The IRS website lists the current income limits.

These fees are one-time charges added to what you owe. They don't reduce your debt — they're extra cost for setting up the plan.

What happens to interest and penalties while you're on a plan

Interest and penalties don't stop when you enter a payment plan. The IRS charges interest on the unpaid balance every day, calculated as a percentage set by law (this rate changes quarterly). Penalties also continue to accrue if you haven't filed all required tax returns.

This means the longer your plan lasts, the more interest you'll pay in total. A plan lasting five years will cost significantly more than a plan lasting two years, even if the monthly payment is lower. When you set up your plan, ask the IRS what the total amount will be by the end of the plan — this includes the original debt plus all interest and penalties.

Three ways to set up a payment plan

Online through IRS.gov is the fastest and cheapest option if you have internet access. Go to IRS.gov, find the payment plan section, and follow the prompts. You'll need your Social Security number, the tax year(s) you owe for, and the amount owed. The IRS will tell you when ready whether you're approved. If you set up automatic bank withdrawals, the setup fee is $31.

By phone at 1-800-829-1040. A representative will walk you through the process. The setup fee is $225 unless your income qualifies for the lower rate. Wait times can be long, especially during tax season (January through April).

By mail using Form 9465 (Installment Agreement Request). Print the form from IRS.gov, fill it out, and mail it to the address listed on the form. Include a copy of your most recent tax return. Processing takes several weeks. The setup fee is $225 unless your income qualifies for the lower rate.

What the IRS needs from you to approve a plan

You'll need to tell the IRS how much you owe, which tax years the debt is from, and how much you can pay each month. If you're setting up online, you can usually do this in minutes. If you're calling or mailing, have your tax return handy so you can answer questions about your income and expenses.

The IRS doesn't require you to prove hardship or explain why you can't pay. They straightforward want to know what monthly payment you can afford. Be realistic — if you say you can pay $500 a month but can't, the IRS will cancel the plan and demand the full amount.

You don't need a lawyer or tax professional to set up a plan, though some people hire one if their situation is complicated. The IRS website has step-by-step instructions for doing it yourself.

What happens if you miss a payment or break the agreement

If you miss a payment, the IRS will send you a notice. You usually have a grace period of a few days before the plan is cancelled. If you know you'll miss a payment, contact the IRS before the due date — they may be able to adjust your plan or give you extra time.

If your plan is cancelled, the IRS can demand the full remaining balance when ready. They can also resume collection actions like wage garnishment or bank levies. To get back on a plan, you'll have to set up a new one and pay another setup fee.

You must also file all required tax returns on time while on a payment plan. If you don't file a return for a year after you've set up the plan, the IRS can cancel it.

Frequently Asked Questions

How long can a payment plan last?

The length depends on how much you owe. Plans can last anywhere from a few months to six years. The IRS will suggest a length based on your debt and the monthly payment you say you can afford. You can ask for a longer plan to lower your monthly payment, but this means paying more interest overall.

Can I change my monthly payment amount after the plan starts?

Yes. If your situation changes and you can pay more, contact the IRS and ask to increase your payment — this shortens the plan and saves you interest. If you can't afford the payment, you can request a modification, though the IRS will review your income and expenses to decide whether to approve it.

What if I can't pay the full amount even with a payment plan?

If your debt is very large and you truly cannot afford any reasonable monthly payment, you may be able to request an Offer in Compromise, where the IRS accepts less than the full amount owed. This is harder to get approved for and requires detailed financial paperwork. The IRS website has information about whether you might may have access to.

Do I need to pay the setup fee upfront?

No. The setup fee is usually added to your first payment or included in your payment plan. You don't pay it separately before the plan starts.

Can I set up a payment plan if I'm being audited?

Usually yes, but the timing matters. If the audit is still ongoing, the IRS may wait until it's finished before approving a plan. If you've already received a bill from the audit, you can set up a plan for that amount. Contact the IRS office handling your audit to ask.

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.