Yes, you can set up a payment plan with the IRS if you owe taxes you cannot pay in full

The IRS calls this an installment agreement. It lets you pay your tax debt over time in monthly payments instead of all at once. You do not need to wait for the IRS to contact you — you can request one yourself, and the IRS will work with you even if you have not filed recent returns or paid taxes before.

The IRS offers several types of payment plans, ranging from short-term arrangements (120 days or fewer) to long-term monthly plans that can last years. Which one you use depends on how much you owe and how quickly you can pay. Setting up a plan stops the IRS from taking collection actions like wage garnishment or bank levies while you are making payments on time.

You will owe interest and penalties on top of your original tax debt, and those continue to grow while you pay. The sooner you set up a plan, the less interest accumulates. If you miss a payment, the agreement can be cancelled and collection actions can resume.

Key Takeaways

  • The IRS offers short-term plans (under 120 days) with no setup fee and long-term monthly plans with a setup fee that ranges based on how you set it up.
  • You can request a payment plan online through IRS.gov, by phone at 1-800-829-1040, or by mail using Form 9465.
  • Interest and penalties continue to accrue on your debt while you pay, so setting up a plan quickly reduces the total amount you will owe.
  • Missing even one payment can cancel your agreement and trigger collection actions like wage garnishment or bank levies.
  • If your income is low, you may be able to get a payment plan with reduced or waived setup fees.

Short-term payment plans (120 days or less)

A short-term plan is the simplest option if you can pay off your debt within four months. You request it, the IRS gives you a important date, and you pay by that date. There is no setup fee, no monthly payment requirement, and no formal agreement to sign. You just need to pay the full amount by the important date they give you.

This works best if you are expecting money soon — a tax refund, a bonus, a settlement — but need a few weeks or months to receive it. The IRS will not take collection action during this window as long as you pay by the important date.

If you miss the important date, the short-term plan ends and the IRS can resume collection efforts. You would then need to request a longer-term plan or work out a different arrangement.

Long-term monthly payment plans

If you cannot pay within 120 days, you can set up a monthly installment agreement. You choose how much to pay each month, and the IRS approves it based on your income and expenses. These plans can run for several years depending on your debt size and payment amount.

The IRS charges a setup fee for long-term plans. The fee depends on how you set it up: online through IRS.gov costs $31, by phone or mail costs $225, and if you are in a financial hardship situation, the fee may be reduced to $31 or waived entirely. Once your plan is in place, you make the same payment every month until the debt is paid off.

Long-term plans are legally binding. If you miss a payment, the IRS can cancel the agreement and resume collection actions. If your financial situation improves significantly, the IRS may ask you to increase your monthly payment.

How to request a payment plan

Online through IRS.gov is the fastest route. Go to IRS.gov/payments and select "Set up a payment plan." You will need your Social Security number, date of birth, and information about your tax debt. The system will show you available monthly payment amounts and let you choose one. You get approval when ready, and the setup fee is $31.

By phone, call the IRS at 1-800-829-1040. A representative will discuss your situation, calculate a payment amount based on what you can afford, and set up the plan. The setup fee is $225 unless you are in financial hardship. This route takes longer than online but lets you explain your circumstances directly.

By mail, complete Form 9465 (Installment Agreement Request) and send it with your tax return or separately to the IRS address for your state. Include a statement of your financial situation if you want the IRS to consider reducing the setup fee. Processing by mail takes several weeks.

You will need your most recent tax return, current income information, and details about your monthly expenses. Have your bank account number ready if you want to set up automatic monthly payments, which the IRS encourages.

What happens to interest and penalties while you pay

Interest and failure-to-pay penalties continue to accrue on your unpaid tax debt every month you are on a payment plan. The interest rate is set by the IRS quarterly and currently runs around 8 percent per year, though this changes. The failure-to-pay penalty is 0.5 percent of your unpaid tax per month, up to 25 percent total.

This means your total debt grows while you pay. If you owe $5,000 and set up a plan to pay $200 per month, you will pay more than $5,000 by the time the plan ends because interest and penalties are added each month. The longer your plan runs, the more interest you pay.

Setting up a plan quickly — before the IRS sends a notice of intent to levy — stops the failure-to-pay penalty from increasing further. Interest will still accrue, but you stop the penalty clock.

When the IRS can cancel your payment plan

Missing a payment is the most common reason the IRS cancels a plan. If you miss a payment, you typically get a notice giving you 30 days to bring the account current. If you do not pay within that window, the IRS can cancel the agreement and resume collection actions.

The IRS can also cancel your plan if your tax situation changes significantly — for example, if you file a new return showing you owe much more than expected, or if you do not file a required return while on the plan. If your income increases substantially, the IRS may contact you to increase your monthly payment.

If your plan is cancelled, you can request a new one, but the IRS will review your history. If you have cancelled plans in the past, they may require a larger down payment or shorter payment timeline.

Payment plan options for people with low income

If your income is below a certain threshold, you may be able to get a Currently Not Collectible status instead of a payment plan. This temporarily pauses collection action while you are in financial hardship, though interest and penalties still accrue. You do not make payments during this period, but the IRS can resume collection efforts once your financial situation improves.

You can also request a reduced setup fee or fee waiver if you are in financial hardship. When you set up a plan by phone or mail, include a statement explaining your situation — medical bills, job loss, disability, or other hardship. The IRS will consider waiving or reducing the $225 setup fee.

If you set up a plan online, the fee is already $31, which is the lowest available. You cannot reduce it further through the online system, but you can call the IRS after setting up the plan to ask about a waiver if your circumstances warrant it.

Frequently Asked Questions

What if I cannot afford the monthly payment the IRS suggests?

Tell the IRS your actual financial situation. You can request a lower payment amount, and the IRS will work with you based on your income and necessary expenses. A lower payment means a longer plan and more total interest, but it keeps you in compliance. If you truly cannot pay anything right now, ask about Currently Not Collectible status instead.

Can I change my payment amount after the plan starts?

Yes. You can contact the IRS to increase or decrease your payment, though the IRS may push back if you want to lower it significantly. Increasing your payment reduces the total interest you pay and shortens the plan. Call 1-800-829-1040 or log into your IRS account online to request a change.

Do I still owe penalties and interest if I am on a payment plan?

Yes. Interest accrues at the IRS quarterly rate (currently around 8 percent annually) and the failure-to-pay penalty continues at 0.5 percent per month until your debt is fully paid. The sooner you pay off the plan, the less total interest you will owe.

What if I get a tax refund while on a payment plan?

The IRS will automatically explore your refund to your payment plan debt. You will not receive the refund as money back. This is one reason to set up a plan quickly — any refunds you are owed will go toward reducing what you owe.

Can I set up a payment plan if I have not filed taxes in several years?

You need to file all missing returns before the IRS will set up a payment plan. Contact the IRS or a tax professional to file those returns first. Once they are filed and you know your total debt, you can then request a payment plan for the full amount owed.