How to Set Up a Payment Plan With the IRS

What an IRS payment plan does and how to start one

An IRS payment plan lets you pay your tax bill in monthly installments instead of all at once. The IRS calls this an "installment agreement." You set up the plan directly with the IRS, choose how much to pay each month, and the IRS collects the payments automatically from your bank account or by check. The plan stays active until your bill is paid in full.

You can request a payment plan whether you owe $600 or $600,000. The IRS will approve most requests if you are current on filing taxes and not in bankruptcy. Setting up a plan does not erase what you owe or reduce the amount—it just spreads the payments over time. You will still owe interest and penalties on top of the original bill, and those continue to grow until the debt is paid.

The fastest way to set up a plan is online through the IRS website, which takes about 15 minutes. You can also call the IRS, mail a form, or work with a tax professional. Online setup is available if you owe $50,000 or less in combined taxes, penalties, and interest.

Key Takeaways

• You can set up an IRS payment plan online at IRS.gov if you owe $50,000 or less and have filed all required tax returns.
• The IRS charges a setup fee (usually $31 to $225 depending on your method) and interest continues to accrue on your balance until it is paid.
• Monthly payments are automatically withdrawn from your bank account, and you can change the payment amount or due date by contacting the IRS.
• If you owe more than $50,000 or cannot pay online, you can call the IRS at 1-800-829-1040 or mail Form 9465 to request a plan.

Setting up a payment plan online

Go to IRS.gov and search for "Online Payment Agreement." You will land on a page where you can enter your Social Security Number or Individual Taxpayer Identification Number, filing status, and tax year. The system will pull up what you owe and let you choose a monthly payment amount. You must pay at least $25 per month, and the IRS will suggest a payment schedule based on your balance and how long you want to take to pay it off.

During setup, you will choose how the IRS collects payment: direct debit from your bank account (the cheapest option) or by check. If you choose direct debit, you provide your bank routing number and account number. The IRS will draft the payment on the date you select each month—usually between the 1st and 28th.

At the end of setup, the IRS will charge a setup fee. If you pay by direct debit, the fee is $31. If you pay by check or other method, the fee is higher. You can pay the setup fee as part of your first payment or separately. The IRS will send you a confirmation number and a letter in the mail within two weeks with your agreement details.

Requesting a plan by phone or mail

Call the IRS at 1-800-829-1040 during business hours (Monday through Friday, 7 a.m. to 7 p.m. your local time). Have your Social Security Number, filing status, and a recent tax return or notice handy. A representative will review your account, discuss payment options, and set up the plan over the phone. This route takes longer than online—expect to wait on hold and spend 30 to 45 minutes on the call.

If you owe more than $50,000, you must request a plan by phone or mail. You can also mail Form 9465 (Installment Agreement Request) to the IRS address listed in your tax notice. Include a check or money order for the setup fee if you want to pay it upfront. Mail delivery and processing takes two to four weeks, so this is the slowest method.

Whether you call or mail, the IRS will ask about your income, expenses, and assets to decide whether to approve the plan and what monthly payment makes sense. If the IRS thinks you can pay more, it may suggest a higher amount. You can negotiate, but the IRS has final say.

Costs: setup fees, interest, and penalties

Setting up a payment plan costs money upfront. The setup fee ranges from $31 (direct debit) to $225 (mail or phone request for higher balances). This fee is separate from what you owe in taxes and is usually added to your first payment or your total balance.

You also continue to owe interest on your unpaid balance. The IRS charges interest daily at a rate set quarterly—currently around 8 percent per year, though this changes. Interest accrues whether you are on a payment plan or not. The longer you take to pay, the more interest you owe.

Penalties also continue to grow. If you filed late, you owe a failure-to-file penalty. If you did not pay on time, you owe a failure-to-pay penalty. These penalties are calculated as a percentage of your unpaid tax and accrue monthly until the bill is settled. A payment plan does not stop penalties—only paying the bill in full does.

What happens after you set up the plan

Once your plan is approved, the IRS will send you a letter confirming the monthly payment amount, the due date, and the account number. Payments are automatically withdrawn from your bank account on the date you chose. You do not have to do anything else unless you want to change the payment amount or date.

If you miss a payment, the IRS will send you a notice. Missing one payment does not automatically cancel the plan, but if you miss three payments in a row, the IRS may terminate the agreement and demand the full balance immediately. If this happens, you can request a new plan, but the IRS may be less flexible.

You can change your monthly payment amount or due date at any time by logging into your IRS account online or by calling 1-800-829-1040. If your financial situation improves and you want to pay off the plan early, you can send a lump sum payment without penalty. The IRS will apply it to your balance and reduce the remaining payments.

When you cannot pay online or need a different type of plan

If you owe more than $50,000, you cannot set up a plan online. You must call the IRS or mail Form 9465. For very large balances (typically $25,000 or more), the IRS may require a financial statement showing your income, expenses, and assets. This helps the IRS decide what you can realistically pay each month.

If you are in severe financial hardship and cannot pay even a small amount each month, you may may have access to for Currently Not Collectible status instead of a payment plan. This temporarily pauses collection efforts, though interest and penalties still accrue. You can request this status by calling the IRS or working with a tax professional.

If you owe back taxes from multiple years, the IRS can combine all of them into one payment plan. The plan covers all years at once, and you make one monthly payment that covers everything.

Working with a tax professional or payment plan company

You do not need to hire anyone to set up a payment plan—the IRS makes it free to request one yourself. However, some people use a tax professional (CPA, enrolled agent, or tax attorney) or a payment plan company to handle the request. These services charge a fee, usually $500 to $2,500, depending on the complexity of your case.

A tax professional can be useful if your situation is complicated—for example, if you owe taxes from multiple years, have not filed recent returns, or are facing wage garnishment or bank levy. They can negotiate with the IRS on your behalf and may be able to get a lower monthly payment or explore other options like an offer in compromise (settling for less than you owe).

Be cautious of companies that promise to "settle your tax debt for pennies on the dollar" or may provide a specific outcome. The IRS does not may provide anything, and these companies often charge high fees for work you could do yourself. If you hire someone, make sure they are a licensed tax professional, not just a debt relief company.

Frequently Asked Questions

Can I set up a payment plan if I have not filed my tax return yet?

No. You must file your tax return before the IRS will set up a payment plan. If you have not filed, file first—you can file online through IRS.gov or with a tax professional. Once your return is processed, you can request a plan.

What if I cannot afford the minimum $25 monthly payment?

Call the IRS at 1-800-829-1040 and explain your situation. If you are in severe hardship, the IRS may place your account in Currently Not Collectible status instead, which pauses collection efforts temporarily. Interest and penalties still accrue, but you are not required to make monthly payments.

Will a payment plan hurt my credit score?

A payment plan itself does not appear on your credit report. However, if you owed taxes and did not pay them, that debt may already be reported to credit bureaus. Setting up a plan shows you are addressing the debt, which is better than ignoring it, but it does not erase past damage.

Can I change my payment plan after it is set up?

Yes. You can change your monthly payment amount, change the due date, or switch from one payment method to another by logging into your IRS account online or calling 1-800-829-1040. Changes usually take effect within one or two billing cycles.

What happens if I pay off my plan early?

You can pay off the remaining balance at any time without penalty. The IRS will apply the payment to your account and close the plan. You will stop owing interest once the balance reaches zero, so paying early saves you money on interest charges.