Installment Agreements/ Payment Plans

For taxpayers who can ultimately pay their tax bill but need more time, an installment agreement provides a structured way to pay over an extended period. A payment plan is an agreement with the IRS that lets taxpayers pay what they owe within a longer timeframe. Taxpayers should only request one if they expect to pay the tax in full within the extended period; failure to pay may lead to a federal tax lien or levy. When a payment plan is requested, the IRS generally suspends levies and pauses the collection statute while the request is pending, during appeals of rejections or terminations and for 30 days after a rejection or termination.

Short‑term plans allow individuals who owe less than $100,000 in combined tax, penalties and interest to pay the balance within 180 days. Short‑term plans have no setup fee but interest and penalties continue until the balance is paid. Long‑term plans (installment agreements) apply when taxpayers need more than 180 days. For individual taxpayers using direct debit, the setup fee is $22 online and $107 if requested by phone or mail; low‑income taxpayers can have fees waived or reimbursed. Without direct debit, fees rise to $69 online or $178 via other methods. Businesses that owe less than $25,000 may qualify for a 24‑month direct debit plan. Setup fees may vary, and paying by credit card incurs processing fees.

Taxpayers can apply online through the Online Payment Agreement (OPA) and often receive immediate approval. Individual online options include a short‑term plan (balance under $100,000) and a simple payment plan for balances under $50,000, which allows monthly payments for up to the collection statute period (generally ten years). Direct debit is encouraged and sometimes required to avoid default. Taxpayers who do not qualify for online service should contact the IRS using the phone number in their notice. To avoid default, taxpayers must make timely payments and file future returns on time; interest and some penalties continue to accrue until the balance is paid.