How to Set Up an IRS Payment Plan

What Is an IRS Payment Plan?

If you owe federal income taxes and cannot pay the full amount by the due date, an IRS payment plan — officially called an installment agreement — allows you to pay your balance over time in monthly installments. Setting one up prevents the IRS from pursuing more aggressive collection actions like wage garnishment or bank levies, as long as you stay current with the agreement terms.

The IRS offers several types of payment plans. Understanding which one applies to your situation is the first step.

Step 1: Know Which Type of Plan You Need

Short-Term Payment Plan

Available if you owe $100,000 or less in combined taxes, penalties, and interest, and can pay in full within 180 days. There is no setup fee, but interest and penalties continue to accrue until the balance is paid.

Long-Term Installment Agreement

Available if you owe $50,000 or less in combined taxes, penalties, and interest, and need more than 180 days to pay. Setup fees apply (currently $31 for online setup with direct debit, $107 for other payment methods). Fees are reduced or waived for low-income taxpayers.

Partial Pay Installment Agreement (PPIA)

If you cannot afford to pay the full balance even with a standard payment plan, a Partial Pay Installment Agreement allows monthly payments based on what you can afford. The IRS reviews your financial situation and may accept less than the full balance over time, though any remaining balance after the statute of limitations (10 years) expires is forgiven.

Step 2: Confirm You Are Eligible

Before applying, ensure the following:

• All required tax returns are filed. The IRS will not approve a payment plan if you have unfiled returns.
• You are up to date on current-year tax obligations (especially estimated taxes if self-employed).
• Your balance falls within the applicable limits for your desired plan type.

Step 3: Gather Required Information

To apply online, you will need:

• Your Social Security number or ITIN.
• Your date of birth.
• Your filing status from your most recent return.
• Your most recent tax return (or your prior-year AGI to verify identity).
• Your bank account number and routing number (for direct debit payments).
• Your email address.

Step 4: Apply Online Through the IRS Website

The fastest way to set up a payment plan is through the IRS Online Payment Agreement (OPA) tool at IRS.gov/OPA. Here is the process:

1. Navigate to IRS.gov and search for "Online Payment Agreement."
2. Click "Apply/Revise as Individual" and verify your identity using your SSN, date of birth, filing status, and prior-year AGI.
3. The tool will display your balance owed and available plan options.
4. Select your plan type (short-term or long-term).
5. Choose your payment method: direct debit from a bank account (lowest fees), payroll deduction, check or money order, or debit/credit card (card processing fees apply).
6. Set your monthly payment amount. For long-term plans, the minimum payment is generally your balance divided by 72 months.
7. Choose your monthly payment date (choose a date that aligns with your cash flow).
8. Review and accept the agreement terms. You will receive immediate confirmation.

Step 5: Apply by Phone or Mail (If You Cannot Apply Online)

If you do not qualify for the online tool or prefer to speak with someone, call the IRS at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses). Be prepared for long hold times. You can also mail Form 9465 (Installment Agreement Request) to your regional IRS processing center, though this takes significantly longer to process.

Step 6: Make Your First Payment

Interest and penalties continue to accumulate on unpaid balances during the installment agreement. Making a partial payment upfront — even if small — reduces the interest-accruing balance immediately. Consider paying as much as you can upfront while still keeping the payment plan active for the remainder.

Step 7: Stay Current with All Future Tax Obligations

An installment agreement requires you to stay current with all future tax filings and payments. If you miss a payment or incur new tax debt without prior IRS approval, the IRS can default your agreement and resume collection actions. If you need to modify your payment amount, contact the IRS proactively before missing a payment.

What Happens After You Set Up the Plan

Once your installment agreement is in place, the IRS typically will not levy your wages or bank accounts as long as you remain compliant. However, a federal tax lien may still be filed in some cases, which can affect your credit. Paying off the balance as quickly as possible minimizes total interest and penalty costs and removes the lien sooner.

Penalty and Interest During a Payment Plan

Setting up a payment plan does not stop penalties and interest from accruing. The failure-to-pay penalty is 0.25% per month (reduced from 0.5%) once an installment agreement is in place. Interest accrues at the federal short-term rate plus 3%. On a $10,000 balance, total additional costs over 5 years can add up to $1,500 or more. Prioritize paying the plan off early when possible.