Tax Relief AnswersIRS Payment Plan (Installment Agreement)
The short answer
Most individuals who owe the IRS can set up a payment plan online in a few minutes, with no financial disclosure, if they owe $50,000 or less in combined tax, penalties and interest and have filed all required returns. A short-term plan (up to 180 days) costs nothing to set up, and a long-term plan paid by direct debit costs $29 online as of October 2026. The limits and fees are on the IRS payment plans page, last updated August 13, 2026.
The two kinds of plan
A short-term payment plan gives you up to 180 days to pay in full. Individuals who owe less than $100,000 in combined tax, penalties and interest can request it online. There is no setup fee.
A long-term payment plan, which the IRS also calls an installment agreement, spreads the balance over monthly payments. Individuals who owe $50,000 or less and have filed all required returns can request it online. The IRS charges a setup fee that depends on how you apply and how you pay. Businesses cannot apply online; the IRS page directs them to call 800-829-4933.
Setup fees, as of October 2026
| Plan | Online | Phone, mail or in person |
|---|---|---|
| Short-term (up to 180 days) | $0 | $0 |
| Long-term, direct debit from a bank account | $29 | $107 |
| Long-term, other payment methods | $69 | $178 |
| Revise an existing plan | $6 | $89 |
| Change a direct debit plan's bank details | $0 | $0 |
Low-income taxpayers, meaning adjusted gross income at or below 250% of the federal poverty level, pay no setup fee on a direct debit plan. If they cannot use direct debit, the fee is $43 and the IRS reimburses it when the plan is completed. The IRS asks for Form 13844 within 30 days of the date on the acceptance letter to apply the low-income rate.
What keeps growing while you pay
A payment plan stops levies and new collection letters, but it does not stop the balance from growing. Interest for individuals is 7% per year for the quarter starting October 1, 2026, compounded daily, per the IRS interest page. The failure-to-pay penalty drops from 0.5% to 0.25% of the unpaid tax per month while an approved plan is in effect, if you filed on time (IRC 6651(h)), per the IRS penalties page. Both continue until the balance is zero.
How much does the choice cost on a $12,000 balance?
Illustrative example, not a calculation for your case. Assume an individual owes $12,000, all of it unpaid tax, has filed every return on time, and wants a long-term plan. The balance is under the $50,000 online limit, so the setup fee depends only on how the plan is set up and paid, using the IRS fees as of October 2026:
| How the plan is set up | Setup fee | Extra cost compared with the cheapest |
|---|---|---|
| Online, direct debit | $29 | $0 |
| Online, other payment method | $69 | $40 |
| Phone, mail or in person, direct debit | $107 | $78 |
The penalty difference is larger over time. Without a plan, the failure-to-pay penalty is 0.5% of $12,000, or $60, for one month. During an approved plan it is 0.25%, or $30, for that month: $30 less each month, before interest. Both rates come from the IRS failure-to-pay penalty page. As payments lower the unpaid tax, the monthly penalty shrinks too.
Steps
- File any return that is missing. The IRS will not approve a long-term plan until all required returns are in.
- Add up what you owe, including penalties and interest, from your IRS online account or your most recent notice.
- Choose short-term if you can pay within 180 days; it costs nothing.
- For a long-term plan, pick a monthly amount you can keep paying, and choose direct debit for the lowest fee.
- Apply through the IRS Online Payment Agreement tool with your identity verified. Mail Form 9465 instead only if you cannot use the tool.
- If your income is at or below 250% of the poverty level and you did not get the reduced fee, send Form 13844 within 30 days of the acceptance letter.
- Keep every payment on schedule and file and pay future years on time; a missed payment or a new unpaid balance can default the plan.
Common mistakes
- Waiting for the IRS to call. A plan is requested by you; the IRS does not set one up on its own.
- Picking a payment so high that you miss one. Changing the amount online costs $6; a default can bring a reinstatement fee and a CP523 notice.
- Expecting a tax refund while on a plan. The IRS applies refunds to the balance and still expects the scheduled payment that month.
- Paying a company to "get you on a payment plan". The online tool is free and takes the same information a company would ask you for.
If your balance is above $50,000, or you cannot afford a payment that pays the balance in full, the IRS has other paths: a partial payment installment agreement, Currently Not Collectible status, or an Offer in Compromise. Each requires a financial statement, and each can be requested directly from the IRS.
FAQ
How much does an IRS payment plan cost?
A short-term plan costs $0. A long-term plan costs $29 online with direct debit, $69 online with other payment methods, and $107 or $178 when set up by phone, mail or in person, as of October 2026. Low-income taxpayers pay $0 with direct debit.
Does a payment plan stop interest and penalties?
No. Interest continues at 7% per year as of the quarter starting October 1, 2026, and the failure-to-pay penalty continues at a reduced 0.25% per month while the plan is in effect.
What is the most I can owe and still apply online?
Individuals can apply online for a long-term plan with $50,000 or less in combined tax, penalties and interest, and for a short-term plan with less than $100,000.
What happens if I miss a payment?
The IRS can send a CP523 notice of intent to terminate the agreement. Contacting the IRS before the date on the notice can keep the plan alive, sometimes with a reinstatement fee.