Yes, you can pay taxes over time instead of in one lump sum
The IRS lets you spread tax payments across months or years through a payment plan, also called an installment agreement. You do not have to pay the full amount on the due date. The IRS charges interest and a setup fee, but a plan keeps you out of default and stops the most aggressive collection actions while you pay.
Payment plans work differently depending on how much you owe and which type of plan you choose. The IRS offers short-term plans (120 days or fewer), long-term plans (more than 120 days), and automatic payment plans that deduct from your bank account each month. State tax agencies have their own payment plan rules, which vary by state.
Key Takeaways
- The IRS charges a setup fee (usually $31 to $225) and interest on the unpaid balance, so a payment plan costs more than paying in full.
- Short-term plans last up to 120 days and have lower fees; long-term plans spread payments over years but accrue more interest.
- You can set up a plan online through IRS.gov, by phone at 1-800-829-1040, or by mail using Form 9465.
- Missing a payment on your plan can end it, so set up automatic bank deductions if possible to avoid that risk.
- State tax agencies run their own payment plans separately from the IRS, so you may need to contact your state revenue office to set one up.
How much the payment plan will cost you
The IRS charges two things on top of your tax debt: a setup fee and interest. The setup fee ranges from $31 to $225 depending on how you set up the plan and how much you owe. If you set up automatic monthly payments from your bank account, the fee is lower ($31) than if you pay by check or money order ($225).
Interest accrues daily on the unpaid balance at a rate set quarterly by the IRS. As of early 2024, the rate is around 8 percent per year, but this changes. The longer your plan runs, the more interest you pay. A plan that stretches over five years will cost significantly more than one that runs six months, even though the monthly payment is smaller.
You also remain subject to penalties if you owed penalties on the original tax bill. The failure-to-pay penalty (0.5 percent per month) stops accruing once you enter a payment plan, but any penalty already added stays on your bill.
Short-term plans: 120 days or less
A short-term plan is the fastest route if you can pay off the debt within four months. You do not need to file any forms. You can request a short-term plan online through IRS.gov, by phone, or by mail, and the IRS will tell you the monthly payment amount based on your total debt and the number of months you choose.
Short-term plans have a lower setup fee ($31 if you pay by automatic bank deduction, $225 otherwise) and accrue less total interest because the debt is paid off quickly. If you think you can scrape together the money within a few months—through a bonus, a tax refund, a loan from family, or a side income—a short-term plan is usually the cheapest option.
If you miss a payment or cannot pay by the end of the 120 days, you can convert to a long-term plan, but you will have to pay another setup fee and restart the clock on interest.
Long-term plans: more than 120 days
Long-term plans spread payments over years, usually up to six years, though the IRS can approve longer terms in some cases. These plans require you to file Form 9465 (Installment Agreement Request) or request the plan online. The setup fee is the same as short-term ($31 to $225), but because the debt takes longer to pay off, the total interest is higher.
The IRS calculates your monthly payment based on the total debt, the number of months you request, and the interest rate. You can propose a monthly amount you think you can afford, and the IRS will either accept it or counter with a different term. If you cannot agree, you can appeal the IRS's proposed payment amount.
Long-term plans stop the IRS from filing a tax lien (a claim against your property) or issuing a levy (seizing your wages or bank account), as long as you stay current on payments. Missing even one payment can end the plan and trigger collection action again.
Setting up a payment plan online, by phone, or by mail
Online is the fastest route if you owe $50,000 or less in combined federal income tax, penalties, and interest. Go to IRS.gov, search for "payment plan" or "installment agreement," and follow the prompts. You will need your Social Security number, date of birth, and information about your tax debt. You can set up a plan and receive confirmation the same day.
By phone, call the IRS at 1-800-829-1040 (Monday through Friday, 7 a.m. to 7 p.m. your local time). Have your tax return and Social Security number ready. The IRS representative will calculate your payment amount and set up the plan over the phone. You will receive a confirmation letter by mail within two weeks.
By mail, complete Form 9465 and send it with a copy of your tax return to the IRS address shown in your notice. Include a cover letter stating the monthly payment amount you are proposing. Mail takes longer—allow four to six weeks for the IRS to process and respond—but it creates a paper record if you need to dispute the terms later.
If you owe more than $50,000, you cannot set up a plan online; you must call or mail Form 9465. The IRS may also require you to provide financial information (income, expenses, assets) to prove you cannot pay the full amount.
Automatic bank payments lower your fee and reduce missed-payment risk
Setting up automatic monthly payments from your bank account cuts the setup fee from $225 to $31, saving you $194 right away. It also removes the risk of forgetting to pay, which would end your plan and restart collection action.
When you set up a plan online or by phone, the IRS will ask if you want to authorize automatic withdrawals. You provide your bank account number and routing number, and the IRS withdraws the payment on a date you choose each month. The withdrawal happens automatically until the debt is paid off or the plan ends.
If your income or expenses change and you cannot afford the automatic payment, you can contact the IRS and request a lower payment amount or a longer payment term. Do not simply stop paying; contact the IRS before a payment is missed.
State tax payment plans work separately from the IRS
If you owe state income tax, you need to set up a separate payment plan with your state revenue office. Each state has its own rules about payment plans, fees, interest rates, and how long you can spread payments. Some states offer online setup; others require a phone call or mailed form.
To find your state's payment plan process, search "[your state] income tax payment plan" or visit your state revenue office website. You will typically need your state tax ID number and information about the amount you owe. Some states charge a setup fee similar to the IRS; others do not. Interest rates vary by state and are usually set by state law.
Setting up a federal payment plan does not automatically set up a state plan. You must contact your state separately. If you owe both federal and state taxes, you will be managing two payment plans with different payment dates, interest rates, and terms.
What happens if you miss a payment or cannot afford the monthly amount
Missing a single payment on your plan can end it. The IRS will send you a notice saying the plan is terminated, and collection action resumes—the IRS can file a lien, issue a levy, or garnish your wages. If you miss a payment, contact the IRS immediately at 1-800-829-1040 to explain and ask to reinstate the plan.
If your financial situation changes and you cannot afford the monthly payment, do not wait until you miss. Call the IRS and request a modification of your plan. You can ask for a lower monthly payment (which extends the plan) or a longer payment term. The IRS will review your request and either approve it or deny it. If denied, you can appeal.
If you are in genuine hardship—unable to pay basic living expenses—you may may have access to for Currently Not Collectible status, which temporarily pauses collection action and your payment plan. Interest and penalties still accrue, but the IRS stops pursuing collection. This status is reviewed every two years and can be lifted if your situation improves.
Frequently Asked Questions
Can I set up a payment plan if I have not filed my tax return yet?
No. You must file your return first so the IRS knows how much you owe. If you have not filed and owe taxes, file as soon as possible. Once the return is processed, you can set up a payment plan. Filing late adds penalties, so do not delay.
Will a payment plan stop the IRS from taking my tax refund?
No. Even with a payment plan in place, the IRS can intercept future tax refunds and apply them to your debt. This is called offset. If you are expecting a refund, tell the IRS when you set up the plan so you understand how it will be used.
What if I pay off my plan early?
You can pay off the plan at any time without penalty. Send a check or money order to the address on your payment plan notice, or call the IRS to arrange a final payment. Paying early saves you interest, so if you come into money, paying down the debt is usually worth it.
Can I change my payment plan after I set it up?
Yes. You can request a modification to lower the monthly payment, extend the term, or change the payment date. Call the IRS at 1-800-829-1040 or go online through IRS.gov. The IRS will review your request and respond within 30 days. Extending the term lowers your monthly payment but increases total interest.
Do I still owe penalties and interest while on a payment plan?
Yes. Interest accrues daily on the unpaid balance. The failure-to-pay penalty (0.5 percent per month) stops accruing once you enter a plan, but interest does not. This is why shorter plans cost less overall—less time for interest to build up.