Can You Make Payments If You Owe Taxes? IRS Installment Plans and Fees

If you owe the IRS and cannot cover the full bill by the due date, you can make payments on your taxes through an IRS payment plan. Short-term plans give you up to 180 days to pay in full; long-term installment agreements let you pay monthly for up to 72 months. Setting one up quickly matters, because an active agreement generally shields your wages, bank accounts, and property from IRS levy.¹

Which Payment Plan Fits Your Balance

Federal law authorizes the IRS to enter written installment agreements so taxpayers can pay off a debt over time.² Which version is open to you depends mostly on how much you owe and how fast you can pay it down.

Short-Term Plan (Up to 180 Days)

A short-term plan gives you up to 180 days to pay the full balance, including penalties and interest that continue to accrue. It is available if you owe less than $100,000 in combined tax, penalties, and interest.³ There is no setup fee. If you just need a few extra months, this is usually the cheapest option.

Streamlined Long-Term Installment Agreement

Need longer than 180 days? A long-term installment agreement lets you make monthly payments for up to 72 months. The streamlined version is open when your combined balance is under $50,000.⁴ Because streamlined plans skip a detailed financial review, they are approved faster than plans for larger debts. If your balance falls between $25,000 and $50,000, the IRS requires you to pay by direct debit from your bank account.

Guaranteed Installment Agreement

The IRS is required by law to approve your installment request, with no discretion to decline, if all of the following are true:²

You owe $10,000 or less in tax, not counting interest and penalties.
You have filed all required returns and paid all taxes due for the past five years, and you have not had an installment agreement during that time.
You agree to pay the full amount within three years.
You cannot pay the liability in full when due.
You agree to stay current on all future tax obligations while the plan is active.

Meet those criteria and the IRS must accept.⁵

Non-Streamlined Agreement (Larger Balances)

When you owe more than $50,000 or cannot pay within 72 months, the IRS will ask for a Collection Information Statement, typically Form 433-F or Form 433-A, showing your income, expenses, bank accounts, investments, and property.⁶ The IRS uses that information to set a monthly payment aimed at satisfying the debt before the collection period expires, generally ten years from the date the tax was assessed.⁷

Partial Payment Installment Agreement

If even a 72-month plan cannot cover the full balance, you may qualify for a partial payment installment agreement. Your monthly payment is set at what you can actually afford, and any balance left when the ten-year collection period ends is written off. The IRS reviews your finances every two years or so and may raise the payment if your ability to pay improves.

How to Apply

Before you apply, file every past-due return. The IRS will not approve a plan if any required return is missing. Have your Social Security Number or ITIN and your exact balance ready.

The fastest route is the Online Payment Agreement tool at IRS.gov, which often gives an immediate response. You can also mail Form 9465 to propose a specific monthly amount and pick a due date from the 1st through the 28th.⁸ Or call the IRS at 800-829-1040 for individuals or 800-829-4933 for businesses.³

If your balance is above $50,000, plan on submitting a financial disclosure with your application. Form 433-F asks for monthly income, necessary living expenses, bank account numbers, and assets. The IRS applies its own Collection Financial Standards for food, clothing, housing, and transportation rather than accepting whatever expenses you list. For 2025–2026, the national standard food allowance for a single person is $497 per month.⁹

Setup Fees, Interest, and Penalties

Short-term plans have no setup fee. Long-term installment agreements carry a one-time charge that depends on how you apply and how you pay:¹⁰

Online with direct debit: $22
Online without direct debit: $69
Phone, mail, or in-person with direct debit: $107
Phone, mail, or in-person without direct debit: $178

Applying online with automatic bank withdrawals gets you the lowest fee and removes the risk of a missed payment causing a default.

A payment plan does not freeze what you owe. Interest and penalties keep accruing on the unpaid balance. As of the first quarter of 2026, the IRS charges 7% annual interest on underpayments, adjusted each quarter based on the federal short-term rate.¹¹

The failure-to-pay penalty normally runs 0.5% of the unpaid tax per month, up to 25%. If you filed on time and have an active installment agreement, that rate drops to 0.25% per month, cutting the ongoing penalty in half.¹² Paying more than the minimum shortens the term and cuts your total cost.

Low-Income Fee Relief

If your adjusted gross income is at or below 250% of the federal poverty guidelines, you qualify as a low-income taxpayer for installment agreement purposes. The fee changes matter:¹³

Direct debit agreement: setup fee waived entirely.
Non-direct-debit agreement: fee reduced to $43, and it may be reimbursed once you complete all payments.

For a single filer in the 48 contiguous states, the 2025 income threshold is $39,125; for a family of four, $80,375. Apply within 30 days of your acceptance letter by submitting Form 13844.

What Happens If You Do Nothing

The IRS generally has ten years from the date of assessment to collect what you owe, and the collection tools are strong.⁷

If you do not pay within 10 days of a notice and demand, the IRS gains the legal authority to levy your property to satisfy the debt.¹ Before levying, the IRS must send written notice at least 30 days ahead. A levy can pull money directly from your bank account, garnish your wages, or seize and sell your vehicle, real estate, or other personal property.¹⁴

The IRS can also file a federal tax lien, a public legal claim against all your property, which damages your credit and makes it hard to sell assets or borrow.¹⁵ For debts above $66,000, adjusted annually, the IRS can certify the debt to the State Department, which may deny your passport application or revoke a passport you already hold.¹⁶

How a Plan Protects You

While your installment agreement is active and in good standing, the IRS generally cannot levy your wages, bank accounts, or property.¹ The reduced failure-to-pay penalty rate applies for the life of the agreement as well.

A plan does not automatically remove a lien that has already been filed, but you may be able to get one withdrawn. Under the IRS Fresh Start initiative, you can request withdrawal of a Notice of Federal Tax Lien if all of these apply:¹⁵

You owe $25,000 or less. You can pay a larger balance down to this threshold.
You have a direct debit installment agreement that will pay the full balance within 60 months or before the collection statute expires, whichever comes first.
You have made at least three consecutive direct debit payments.
You are current on all filing and payment requirements.
You have not defaulted on this or any earlier direct debit agreement.

A withdrawal removes the public record. You still owe the underlying debt.

Changing or Defaulting on a Plan

If your finances shift after you set up a plan, you can request a change. The Online Payment Agreement tool lets you adjust the monthly amount directly. If the new figure falls below IRS minimums, you will be asked to submit Form 433-H or Form 433-F explaining why.³ You can also modify by phone.

Miss a payment or fail to file a required return, and the IRS will send Notice CP523, warning that it intends to terminate the agreement. Termination ends your levy protection. You can appeal a proposed termination through the Collection Appeals Program by filing Form 9423.¹⁷

If your plan does lapse, you can ask to have it reinstated through the online tool or by phone. The reinstatement fee is $10, and low-income taxpayers may be reimbursed.¹⁰

When Even a Payment Plan Is Too Much

If a reduced monthly payment would still leave you unable to cover basic living costs, two other options exist.

Currently Not Collectible Status

The IRS can place your account in Currently Not Collectible status if it decides you cannot pay your tax debt and still afford essentials like rent, food, and utilities.¹⁸ Collection activity pauses while the status holds. Interest and penalties keep accruing, and the IRS will review your finances periodically. If the ten-year collection statute runs out while you are in this status, the debt is written off.

Offer in Compromise

An Offer in Compromise lets you settle for less than the full amount. The IRS will consider one when there is genuine doubt about how much you owe, when your assets and income clearly cannot cover the balance, or when full payment would create economic hardship.¹⁹ If you could pay in full through an installment agreement, you generally will not qualify.

You apply on Form 656 with a financial disclosure on Form 433-A (OIC) for individuals. The IRS weighs your offer against what it calls your reasonable collection potential. A lump sum offer, paid in five or fewer installments within five months of acceptance, must include 20% of the proposed amount upfront. A periodic payment offer, six or more installments over up to 24 months, must include the first installment with the application.¹⁹ Low-income taxpayers at or below 250% of the poverty guidelines are exempt from the application fee and required initial payments.

State Taxes Are Separate

State revenue departments run their own payment plan programs, entirely apart from the IRS. Setting up an IRS plan does nothing about state tax debt, and vice versa. Eligibility rules, maximum terms, and disclosure requirements vary widely, so check your state tax agency’s website for sections labeled “payment plans” or “installment agreements.”

Interest rates on unpaid state taxes typically run from about 5% to 15% annually, and failure-to-pay penalties generally fall between 2% and 25% of the unpaid balance depending on the state. Many states also tie tax compliance to professional and driver’s license renewals, so falling behind can put a hold on your license until you pay or set up a plan. Documentation often mirrors the federal process, and most state agencies now offer online portals for calculating monthly payments.

1
Office of the Law Revision Counsel. 26 USC 6331 – Levy and Distraint
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Office of the Law Revision Counsel. 26 USC 6159 – Agreements for Payment of Tax Liability in Installments
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Internal Revenue Service. Payment Plans; Installment Agreements
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Internal Revenue Service. IRS Payment Plan Options – Fast, Easy and Secure
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Internal Revenue Service. Topic No. 202, Tax Payment Options
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Taxpayer Advocate Service. Need Options for When You Owe Federal Taxes, But Can’t Pay in Full?
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Internal Revenue Service. Time IRS Can Collect Tax
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Internal Revenue Service. Instructions for Form 9465
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Internal Revenue Service. National Standards: Food, Clothing and Other Items
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Internal Revenue Service. Online Payment Agreement Application
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Internal Revenue Service. Quarterly Interest Rates
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Internal Revenue Service. Options for Taxpayers Who Need Help Paying Their Tax Bill
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Internal Revenue Service. Application for Reduced User Fee for Installment Agreements
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Internal Revenue Service. Levy
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Internal Revenue Service. Understanding a Federal Tax Lien
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Internal Revenue Service. Revocation or Denial of Passport in Cases of Certain Unpaid Taxes
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Internal Revenue Service. Notice CP523 – Notice of Intent to Levy
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Taxpayer Advocate Service. Currently Not Collectible (CNC)
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Internal Revenue Service. Topic No. 204, Offers in Compromise