How to Set Up an IRS Payment Plan

Quick Answer

If you can’t pay your tax bill in full, an IRS payment plan can give you an additional 180 days to six years to pay. Even with monthly penalties and interest, you may save money versus using a high-interest credit card or even a personal loan to cover your IRS tax bill.

A woman planning her finances at home

Paying your tax bill in full is the best way to avoid penalties, interest, collections and the distinctly unpleasant feeling you might get from owing money to the IRS. However, if the tax filing deadline is approaching and you don't have the money to pay what you owe, you may be able to set up an IRS payment plan that buys you up to six years to pay.

Setting up a payment plan with the IRS is relatively simple, won't hurt your credit and may cost you less than high-interest credit card debt or a personal loan, even after paying penalties and interest. Here's what you need to know about IRS payment plans and how to apply.

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How Do IRS Payment Plans Work?

The IRS offers payment plans for people who can't pay their entire tax bills when they file. Short-term payment plans allow you up to 180 days to pay your bill in full. Long-term payment plans give you up to 72 months to pay your balance. Both short- and long-term plans have associated costs. Here are a few to consider:

Penalties and Interest

Even after establishing a payment plan, the IRS charges late-payment penalties and interest on your outstanding balance until it's paid in full. While you are making payments on an approved IRS payment plan, your monthly penalty is 0.25% of your unpaid tax bill—half the penalty you would pay if you left your bill unpaid without a payment plan in place (0.5%). The current interest rate on unpaid taxes is 8% per year, compounded daily.


There's no fee to apply for and set up a short-term payment plan online. Long-term payment plans (also known as installment plans) have an online setup fee of $31 if you agree to automatic payments using direct debit, or $131 if you make manual payments. If you set up your payment plan by mail or phone, the setup fee is $107 with direct debit or $225 without it. The IRS also charges transaction fees for online card payments.

Help for Low-Income Taxpayers

The IRS may waive or reduce certain fees for qualifying low-income taxpayers. Apply for fee reduction using IRS Form 13844. Additionally, you may be able to reduce the amount you owe through an offer in compromise if the IRS determines that you can't afford to pay your outstanding tax bill. Read more about offers in compromise in a downloadable IRS booklet.

Who Is Eligible for an IRS Payment Plan?

To see if you qualify for an IRS payment plan, start by filing your taxes. Even if you think you may be unable to pay, prepare and file your tax return by the filing deadline to avoid a late-filing penalty. Calculating what you owe on your tax return will help you determine whether you're eligible to apply for a payment plan and which plan might work for you.

You have a few basic options if you're applying for a payment plan with the IRS.

IRS Payment Plan Options
Eligibility Plan Terms
Short-term payment plan Less than $100,000 in combined tax, penalties and interest

Get an additional 180 days to pay your balance in full

Long-term payment plan Less than $50,000 in combined tax, penalties and interest

Make monthly payments for up to 72 months

Business payment plan Less than $25,000 in combined tax, penalties and interest from the current and preceding tax year

Make monthly payments for up to 24 months

If you're already in the process of resolving a tax issue with the IRS, you can propose a monthly payment plan as long as you owe $250,000 or less and can pay your balance within the length of the collection statute, typically 10 years.

Pros and Cons of IRS Payment Plans

If you have the means to pay your tax bill in full, that's generally the best option. You'll avoid penalties, interest, setup fees and the risk of missing a payment inadvertently down the line. If you need a payment arrangement, setting up an IRS payment plan has both advantages and disadvantages compared to personal loans, credit cards or borrowing from savings.

Pros of IRS Payment Plans

Setting up a payment plan directly with the IRS offers some key benefits.

  • No need for loans or credit: Although you'll pay interest on your IRS debt, you may pay less than you would if you used a high-interest credit card to carry a balance—and possibly less than for a personal loan as well. You'll also avoid having to apply for new credit, which can be especially helpful if your credit score is low.
  • Avoid collections and liens: It may be tempting to ignore your IRS debt and hope it goes away, but that's not a winning strategy. The IRS is serious about collections. They can place a lien against your real estate, personal property and financial assets. If your debt continues to go unpaid, the IRS can levy, seize and sell your property.
  • Enjoy predictable budgeting: An IRS payment plan has regular monthly payments and a defined end date. Though the additional monthly expense may be a challenge, budgeting for it is simple: You know what you'll pay and for how long.

Cons of IRS Payment Plans

If you have other options—including tapping your savings or investment account, using a low-interest personal loan or credit card, or borrowing from friends or family—consider these potential downsides to using an IRS payment plan.

  • You'll pay interest and penalties. You'll have to pay interest and monthly penalties for as long as you have an outstanding balance. You may also have to pay a setup fee and transaction fees for online card payments. If you can use savings or a 0% introductory APR credit card offer to pay your tax bill instead, you might save money over borrowing from the IRS.
  • You'll carry debt. Although IRS debt doesn't appear on your credit report and does not affect your credit, it still represents money you owe and a monthly payment you'll have to meet until your balance is paid.
  • Your plan options are limited. As an individual taxpayer, you can't make payments on a balance of more than $50,000 for a long-term payment plan or $100,000 for a short-term plan, though you may still be able to negotiate a payment arrangement directly with the IRS if your debt is larger.

How to Set Up a Payment Plan With the IRS

If you can't pay your IRS tax bill in full, pay as much as you can and set up a payment plan to cover the rest. Individual taxpayers with $100,000 or less in combined debt or business taxpayers with up to $25,000 in combined debt can set up a payment plan online following these steps.

  1. Find the exact amount you owe using your tax return or a balance notice you've received from the IRS.
  2. Estimate how much you can pay monthly and how long you need to pay off your debt. A short-term plan gives you up to 180 days (or roughly six months); a long-term plan can extend your payments up to 72 months (six years).
  3. Visit the IRS payment plan portal to apply for your payment plan.
  4. Be prepared to create an IRS account online if you don't already have one. You'll need a photo ID, email address, Social Security number and a mobile device with internet access to verify your identity with
  5. Have your bank routing and account numbers ready if you're planning to set up direct debit. Automatic payments using direct debit are required if your individual balance is $25,000 or more, or if your business balance is $10,000 or more.

You can also apply for a payment plan by mail using IRS Form 9465. Or call the IRS at 800-829-1040 (for individual taxpayers) or 800-829-4933 (for businesses) to discuss your plan options by phone.

The Bottom Line

Getting hit with a tax bill you can't pay is stressful. Setting up a payment plan with the IRS is one way to alleviate the stress—and make paying your tax bill manageable. Once you've worked out a payment plan, you may want to double-check your withholding to make sure you're setting aside enough each paycheck to avoid another tax bill in the year to come. Alternatively, consider making quarterly estimated tax payments to bridge the gap, so you don't end up owing too much at tax time. An IRS payment plan can be a helpful solution, but avoiding a large bill on April 15 is decidedly better.