IRS Payment Plans and Installment Agreements: Types, Fees, and Applying

If you owe federal taxes and can’t pay in full, the IRS will generally let you settle the balance over time through one of its payment plans or installment agreements. The options range from a short extension of up to 180 days with no setup fee to multi-year monthly plans, and setup fees start at $22 when you apply online and pay by direct debit.

Who Can Get a Payment Plan

Most individuals who owe federal tax and have filed their returns can get some form of plan. The statute gives the IRS discretion to approve an installment agreement whenever doing so will help collect the debt more effectively than seizing assets.¹

One group is entitled to approval by law. If you’re an individual and your total tax debt is $10,000 or less (not counting interest and penalties), the IRS must grant an installment agreement, provided you’ve filed all required returns and paid all taxes due during the previous five years and haven’t had an installment agreement during that period.² That’s the only scenario where the IRS has no discretion to say no.

For everyone else, baseline requirements apply. You need to be current on all federal tax return filings. Businesses with employees must be current on federal tax deposits for the current and prior quarters. Individuals who owe more than $50,000 generally need to submit detailed financial disclosures before the IRS will consider a plan.³ The IRS also expects the debt to be paid within its 10-year collection window, which starts on the date the tax was assessed.⁴ If you’ve defaulted on a previous agreement within the last five years, expect closer scrutiny.

The Types of Plans

Short-Term Payment Plans

If you can pay within 180 days, the short-term plan is the simplest option. It’s available to individuals who owe less than $100,000 in combined tax, penalties, and interest, and there’s no setup fee.⁵ Interest and penalties still accrue until the balance is gone, so this works best when you’re expecting money soon and just need a few months of breathing room.

Streamlined Long-Term Installment Agreements

When you need more than 180 days, you move to a long-term installment agreement with monthly payments. The easiest version to get approved is the streamlined plan, available to individuals who owe $50,000 or less in assessed taxes, penalties, and interest. Businesses qualify if they owe $25,000 or less (or $50,000 or less for an out-of-business sole proprietorship) with trust fund taxes, and $50,000 or less without trust fund taxes.³

Streamlined plans don’t require a detailed financial disclosure, and the IRS won’t file a federal tax lien against you as part of approving the agreement.⁶ Your proposed monthly payment must be large enough to pay off the balance within 72 months or before the 10-year collection statute expires, whichever comes first.⁷

If your balance exceeds the streamlined thresholds, you can still get an installment agreement, but the IRS will require full financial disclosure on Form 433-A or Form 433-F, and a federal tax lien determination becomes part of the process.

Partial Payment Installment Agreements

When even 72 months of payments won’t cover the full balance before the collection statute expires, the IRS may approve a Partial Payment Installment Agreement (PPIA). You pay what you can afford each month, and whatever is left when the 10-year clock runs out gets written off.⁸

Getting a PPIA approved requires significant financial transparency. The IRS examines your equity in assets and monthly disposable income to determine your maximum payment, and it reviews your finances every two years. If your situation improves, the IRS can demand higher payments or a lump-sum settlement.⁸ A federal tax lien filing is standard for PPIAs.

Setup Fees

Fees depend on how you apply and how you pay. Applying online and paying by direct debit gives you the lowest cost.⁵

Online, direct debit: $22
Online, non-direct debit: $69
Phone, mail, or in-person, direct debit: $107
Phone, mail, or in-person, non-direct debit: $178

Low-income taxpayers (generally those with income at or below 250% of the federal poverty guidelines) get the direct debit setup fee waived entirely when they apply online. For non-direct debit plans, the fee drops to $43 regardless of application method and may be reimbursed if certain conditions are met.⁵ Revising an existing plan costs $10 online or $89 by phone, mail, or in person; changes to existing direct debit agreements are free.

Interest and Penalties Keep Running

An installment agreement doesn’t freeze your balance. Interest continues to accrue on the unpaid amount at the IRS’s current rate of 7% per year, compounded daily.⁹ The failure-to-pay penalty also keeps adding to your balance each month.

There is one meaningful break. If you filed your return on time and have an approved installment agreement, the failure-to-pay penalty drops from 0.5% per month to 0.25% per month.¹⁰ That’s half the normal rate. On a $30,000 balance, though, you’re still adding roughly $2,100 per year in interest alone before penalties. Make the largest monthly payment you can afford; every extra dollar cuts what you pay in the end.

How to Apply

Online

The fastest route is the Online Payment Agreement tool on irs.gov. You enter your identification and financial information, choose your monthly amount and due date, and sign digitally. The system gives you an immediate approval or denial.¹¹ Online applications also carry the lowest setup fees, so unless your situation requires a paper filing, start here.

By Mail or Phone

If you can’t use the online tool, file Form 9465 (Installment Agreement Request) by mail. The form asks for your proposed monthly payment amount and your preferred due date, which can be any day from the 1st through the 28th of the month.⁷ Mail it to the address listed in the instructions for your region. The IRS typically responds within 30 days, though it can take longer during peak filing season.¹² You can also set up an agreement by phone: 800-829-1040 for individuals, 800-829-4933 for businesses.

Payroll Deduction

Form 2159 sets up a payroll deduction agreement. Your employer has to agree to participate, deducting the specified amount each pay period and sending it to the Treasury on your behalf.¹³ The setup fee is $178, or $43 for low-income taxpayers. It works well if you want automatic payments without giving the IRS direct access to your bank account.

What to Have Ready

For any application method, gather your Social Security Number (or business EIN), the exact balance due for each tax year, and your bank routing and account numbers if you’re choosing direct debit. If your liability exceeds $50,000 or you’re requesting a PPIA, you’ll need Form 433-A (Collection Information Statement), which asks for a full accounting of monthly income from wages, pensions, investments, and Social Security, plus a breakdown of monthly living expenses.¹⁴ The IRS compares your reported expenses against national and local standards for housing, food, and transportation, so keep recent pay stubs, bank statements, and utility bills on hand. Discrepancies between what you report and what the IRS considers reasonable are where applications stall.

Changing a Plan Already in Place

Financial situations change, and the IRS lets you adjust an active agreement rather than defaulting on it. The easiest way is through your IRS Online Account, where you can revise your payment amount and due date.⁵ If your revised amount falls below the minimum the system will accept, it will direct you to submit Form 433-H or Form 433-F with updated financial information for manual review.

If you’re struggling to make payments, contact the IRS before you miss one. A proactive modification request is far easier to navigate than cleaning up a default, and the $10 online revision fee is a fraction of the $89 reinstatement fee after a default.

If You Default

An installment agreement is a binding contract, and the IRS can modify or terminate it for several reasons: you miss a payment, fail to pay a new tax liability on time, don’t file a required return, provided inaccurate information when applying, or your financial condition has significantly improved.¹

Before termination, you’ll get a CP523 notice (Notice of Intent to Levy) giving you 30 days to either pay the past-due amount or contact the IRS to resolve the problem.¹⁵ Those 30 days are your cure period. Act within that window by catching up on missed payments or filing any delinquent returns, and you can often save the agreement. If you don’t, the IRS terminates the agreement and can begin collecting through levies and garnishments. A CP521 is a routine payment reminder; a CP523 is urgent.¹⁶

Levy Protection While Your Plan Is Active

One of the biggest practical benefits of an installment agreement is that it generally prevents the IRS from levying your bank accounts, garnishing your wages, or seizing your property. That protection applies while a plan request is being considered, while the plan is in effect, for 30 days after a request is rejected or a plan is terminated, and during any appeal of that rejection or termination.⁵ The 10-year collection clock also pauses during these periods, so the government gets extra time to collect while you get protection from enforcement.

Appealing a Rejection or Termination

If the IRS rejects your request, modifies it in a way you can’t afford, or terminates an existing agreement, you can appeal through the Collection Appeals Program (CAP). File Form 9423 (Collection Appeal Request) with the IRS office that took the action within 30 days of the decision.¹⁷ Don’t send the form directly to the Appeals office; it must go to the same office or revenue officer who made the decision you’re challenging.

The 30-day deadlines are strict. For a rejected agreement, the clock starts from the rejection date. For a proposed termination, it starts from the date on the notice. For an actual termination, you have 30 days starting the day after the termination takes effect.¹⁸ While an appeal is pending, the IRS generally cannot levy or garnish, so filing promptly protects you even if you ultimately lose.

When Even a Partial Plan Won’t Work

Offer in Compromise

An Offer in Compromise (OIC) lets you settle for less than the full amount. The IRS will generally accept an OIC only when it determines the debt can’t be collected in full through an installment agreement or from your assets. To apply, submit Form 656 along with a Collection Information Statement (Form 433-A OIC or 433-B OIC), a $205 application fee, and an initial payment.¹⁹

You choose between two payment structures. A lump-sum offer requires 20% of the proposed amount upfront, with the rest paid within five months of acceptance. A periodic payment offer requires smaller monthly payments over 6 to 24 months, starting with the first payment at submission. Low-income taxpayers (for example, a single individual earning under $39,900 or a family of four under $82,500 in 2026) can have both the application fee and the initial payment waived.¹⁹

Currently Not Collectible Status

When paying anything would prevent you from covering basic living expenses, you can request Currently Not Collectible (CNC) status. This isn’t forgiveness. The debt still exists and interest still accrues, but active collection stops. The IRS evaluates hardship using Form 433-A or Form 433-F.²⁰

If your total unpaid balance is under $10,000 and your situation clearly qualifies (you’re incarcerated, your only income is Social Security or unemployment, you have a terminal illness, or you have no income at all), the IRS can grant CNC status without requiring full documentation.²⁰ If the 10-year collection statute expires while your account is in CNC status, the remaining balance is wiped out.

1
Office of the Law Revision Counsel. 26 USC 6159 – Agreements for Payment of Tax Liability in Installments
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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. Simple Payment Plans for Individuals and Businesses
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Internal Revenue Service. Time IRS Can Collect Tax
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Internal Revenue Service. Payment Plans; Installment Agreements
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Internal Revenue Service. IRM 5.14.1 Securing Installment Agreements
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Internal Revenue Service. Instructions for Form 9465
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Internal Revenue Service. IRM 5.14.2 Partial Payment Installment Agreements and the Collection Statute Expiration Date
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Internal Revenue Service. Interest Rates Remain the Same for the First Quarter of 2026
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Internal Revenue Service. Failure to Pay Penalty
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Internal Revenue Service. IRS Payment Plan Options
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Internal Revenue Service. Topic No. 202 – Tax Payment Options
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Internal Revenue Service. Form 2159, Payroll Deduction Agreement
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Internal Revenue Service. Form 433-A – Collection Information Statement for Wage Earners and Self-Employed Individuals
15
Internal Revenue Service. CP523 Notice – Notice of Intent to Levy
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Internal Revenue Service. Understanding Your CP521 Notice
17
Internal Revenue Service. Collection Appeal Request – Form 9423
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Internal Revenue Service. IRM 8.24.1 Collection Appeals Program
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Internal Revenue Service. Form 656-B Offer in Compromise Booklet
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Internal Revenue Service. IRM 5.16.1 Currently Not Collectible