The IRS offers four main payment plans: short-term extension, installment agreement, currently not collectible status, and offer in compromise
If you owe the IRS and cannot pay in full by the tax deadline, you have options beyond a lump-sum payment. The IRS does not require you to pay everything at once, and choosing the right plan depends on how much you owe, how quickly you can pay, and your current financial situation. Each plan has different costs, approval timelines, and rules about what happens if you miss a payment.
The four main paths are a short-term extension (120 days to pay with no setup fee), an installment agreement (monthly payments over months or years), currently not collectible status (pause collection while you recover financially), and an offer in compromise (settle for less than you owe). Understanding which one fits your situation means knowing what each costs, how long approval takes, and what the IRS expects from you afterward.
Key Takeaways
- A short-term extension gives you 120 days to pay with no setup fee, but you still owe interest and penalties during that time.
- Installment agreements let you pay monthly over 24 months to 72 months depending on the amount owed, with setup fees ranging from $31 to $225.
- Currently not collectible status pauses IRS collection action for up to two years while you handle a financial hardship, though interest and penalties keep accruing.
- An offer in compromise settles your debt for less than the full amount owed, but requires detailed financial disclosure and approval odds are low unless your situation meets strict criteria.
- You can request a payment plan online, by phone, or by mail, and the IRS will tell you within days whether you are approved.
Short-term extension: paying within 120 days
A short-term extension gives you up to 120 days from the original tax deadline to pay your full tax bill without setting up a formal payment plan. There is no setup fee, no monthly payment requirement, and no credit check. You simply request the extension and the IRS grants you the extra time.
Interest and penalties continue to accrue during those 120 days, so the longer you wait to pay, the more you owe. This option works best if you know you can pay the full amount within four months but need a little breathing room. If you cannot pay within 120 days, you will need to move to an installment agreement or another option.
You can request a short-term extension by calling the IRS at 1-800-829-1040, through your online IRS account, or by mailing Form 9465 (Installment Agreement Request). The IRS typically approves these within a few days.
Installment agreements: monthly payments over time
An installment agreement lets you pay your tax debt in monthly installments instead of a lump sum. The IRS offers two types: a may provide installment agreement for smaller debts and a regular installment agreement for larger amounts. The length of the plan depends on how much you owe.
For debts under $50,000, you can set up a may provide installment agreement online with no financial review. The IRS will approve it automatically as long as you agree to pay within 72 months. Setup fees range from $31 to $225 depending on whether you pay online or by phone, and whether you set up automatic payments from your bank account (automatic payments cost less). Monthly payments are calculated by dividing your debt by the number of months in your plan.
For debts over $50,000, you will need a regular installment agreement, which requires the IRS to review your financial situation. You must complete Form 433-F (Collection Information Statement) or Form 433-A (for individuals) to show your income, expenses, and assets. The IRS uses this to determine how much you can afford to pay each month and how long your plan will last. These agreements can stretch up to 72 months, but the IRS may require a shorter timeline if your financial picture allows faster payment.
If you miss a payment, the IRS can terminate your agreement and demand the full remaining balance. You have the right to request reinstatement, but the IRS may impose a new setup fee.
Currently not collectible status: pausing payments during hardship
Currently not collectible status is not a forgiveness program—it is a temporary pause on IRS collection action while you face a financial hardship. The IRS stops sending notices, stops garnishing wages, and stops levying bank accounts. You do not make monthly payments during this period.
Interest and penalties continue to accrue on your debt, so the amount you owe grows. The IRS typically grants this status for up to two years at a time, after which they review your situation to see if your finances have improved. If they have, the IRS will ask you to resume payments or pursue another option. If your hardship continues, you can request another two-year period.
To request currently not collectible status, you must show the IRS that you cannot afford to pay because of a temporary hardship—job loss, medical emergency, reduced income, or similar circumstances. You will need to provide financial information through Form 433-F or Form 433-A. The IRS does not require a formal application; you can request this status by calling 1-800-829-1040 or by mail. Approval typically takes two to four weeks.
Offer in compromise: settling for less than you owe
An offer in compromise allows you to settle your tax debt for less than the full amount owed. The IRS will consider this option only if your financial situation makes it unlikely you will ever be able to pay the full debt, or if there is doubt about whether the debt is legally owed.
To pursue an offer in compromise, you must submit Form 656 (Offer in Compromise) along with Form 433-A or Form 433-B (depending on whether you are self-employed), detailed financial statements, and documentation of your income and assets. The IRS uses a formula to calculate what they believe you can reasonably pay over time, and they will only accept an offer lower than that amount if special circumstances apply.
The IRS charges a $225 application fee to review your offer, though you may be able to request a fee waiver if your income is below 250 percent of the federal poverty line. Processing an offer in compromise typically takes six months to two years. While your offer is pending, the IRS pauses collection action, though interest and penalties continue to accrue. If the IRS rejects your offer, you can appeal or request reconsideration, but most offers are declined unless the taxpayer's circumstances are severe.
How to request a payment plan
You can request a payment plan through three channels: online, by phone, or by mail. The fastest route is online through your IRS account at irs.gov. You can set up a may provide installment agreement in minutes if your debt is under $50,000 and you choose automatic bank payments.
By phone, call the IRS at 1-800-829-1040 during business hours. Have your Social Security number, tax year, and a rough idea of how much you owe ready. The IRS representative will walk you through your options and can set up a plan on the spot for smaller debts. For larger debts or currently not collectible status, they will mail you forms to complete and return.
By mail, send Form 9465 (Installment Agreement Request) or Form 656 (Offer in Compromise) to the IRS address listed in your notice. Include a cover letter explaining which payment plan you are requesting and why. The IRS will respond within 30 days for installment agreements and within 60 days for offers in compromise.
Comparing setup fees and approval timelines
| Payment Plan | Setup Fee | Approval Timeline | Best For |
|---|---|---|---|
| Short-term extension | $0 | A few days | Paying in full within 120 days |
| may provide installment agreement (under $50,000) | $31–$225 | A few days | Smaller debts, automatic approval |
| Regular installment agreement (over $50,000) | $31–$225 | 2–4 weeks | Larger debts requiring financial review |
| Currently not collectible status | $0 | 2–4 weeks | Temporary financial hardship |
| Offer in compromise | $225 (may be waived) | 6 months–2 years | Settling for less due to severe hardship |
What happens if you miss a payment or your circumstances change
If you miss a payment on an installment agreement, the IRS will send you a notice. You have the right to request reinstatement within 30 days of the missed payment, though the IRS may charge a new setup fee. If you do not respond, the IRS can terminate your agreement and demand the full remaining balance immediately.
If your financial situation improves while you are on currently not collectible status, the IRS will contact you to discuss resuming payments or switching to an installment agreement. If your situation worsens and you cannot afford your installment payments, you can request a modification to extend the payment period or request currently not collectible status instead.
You can modify an existing installment agreement by calling the IRS or logging into your online account. Changes typically take effect within a few days for online requests and one to two weeks for phone requests.
Frequently Asked Questions
Can I set up a payment plan if I owe penalties and interest, not just the original tax?
Yes. Your payment plan covers the original tax, penalties, and interest all together. Interest continues to accrue on the unpaid balance during your plan, so the longer your plan lasts, the more interest you pay. Penalties may stop accruing once you set up a plan, depending on the type of penalty.
What if I cannot afford the monthly payment the IRS calculated?
Request a modification to extend your payment period, which lowers your monthly payment. You can also request currently not collectible status if you are facing a temporary hardship. The IRS will work with you to find a payment amount you can sustain, though they will not accept a plan that extends beyond 72 months for most debts.
Do I need a lawyer or tax professional to set up a payment plan?
No. You can set up a may provide installment agreement online in minutes without professional help. For larger debts, currently not collectible status, or an offer in compromise, a tax professional or attorney can help you gather financial documents and present your case, but it is not required.
If I set up a payment plan, will the IRS still garnish my wages or levy my bank account?
No, as long as you stay current on your payments. Once you have an approved installment agreement or currently not collectible status, the IRS stops collection action. If you miss a payment and do not respond to the notice, collection action can resume.
Can I pay off my plan early without a penalty?
Yes. You can pay your full remaining balance at any time without penalty. Paying early reduces the interest that accrues, so it saves you money if you are able to do so.