If you can’t pay your tax bill, the IRS will almost always let you pay it over time — and setting it up online takes minutes. A short-term plan (up to 180 days) costs $0 to set up; a long-term installment agreement costs between $22 and $178 online depending on how you pay, with fees waived or reduced for lower incomes.
The worst move is ignoring the bill, because penalties and interest run either way. Here is how the plans compare and how to pick.
What Payment Plans Does the IRS Offer?
Two main types, per the IRS payment plans page:
| Plan | Length | Setup fee (online) | Best for |
|---|---|---|---|
| Short-term | Up to 180 days | $0 | Balances you can clear within 6 months |
| Long-term, direct debit | Monthly until paid | $22 low-income / $130 standard | Most people with larger balances |
| Long-term, other payment methods | Monthly until paid | $43 low-income / $178 standard | Those who can’t use direct debit |
Applying by phone or mail instead of online pushes the fee up to as much as $225 — the online route is cheaper every time. Taxpayers at or below 250% of the federal poverty level get the reduced fee automatically, and direct-debit low-income applicants can have it waived entirely.
How Do You Set One Up Online?
- Go to the IRS Online Payment Agreement application and sign in (or create) your IRS Online Account.
- Pick short-term or long-term and set your monthly amount and draft date.
- Get the approval on screen — no calls, no mailing Form 9465, no waiting.
Most individual taxpayers who owe under the online thresholds and have filed all required returns are approved automatically. If you can’t use the online tool, Form 9465 by mail still works — just with the higher fee.
Does a Payment Plan Stop Penalties and Interest?
No — this is the part people misunderstand. Interest and the late-payment penalty keep accruing on the unpaid balance until it hits zero. What the plan does:
- Cuts the failure-to-pay penalty rate in half (from 0.5% to 0.25% per month) while the agreement is active
- Stops enforced collection — no levies or garnishments while you keep the terms
- Prevents your future refunds from disappearing into surprise collections — though the IRS does apply refunds to the balance, which is normal and shrinks the debt; that’s different from the debt-collection offsets covered in why was your tax refund taken?
So: pay as much as you can upfront, finance only the remainder.
What If You Truly Can’t Pay Anything?
Two formal options exist below the payment-plan tier:
- Currently Not Collectible status — if paying would leave you unable to cover basic living expenses, the IRS can pause collection. Interest still accrues, but nothing is due while your finances stay tight.
- Offer in Compromise — settling for less than owed. Real, but narrow: the IRS accepts only when the offer matches what it could realistically ever collect. Use the IRS’s own pre-qualifier tool before paying anyone who advertises "pennies on the dollar."
A year with unemployment income is a common way people land here — benefits are taxable and nothing is withheld by default, a trap explained in do you pay taxes on unemployment benefits?.
FAQ
Will a payment plan hurt my credit?
No — the IRS doesn’t report agreements to credit bureaus. A filed Notice of Federal Tax Lien (for larger unpaid balances) is public record, but streamlined direct-debit plans usually avoid one.
Can I change the monthly amount later?
Yes — the Online Payment Agreement tool lets you revise the amount, due date, and payment method after setup.
What happens if I miss a payment?
The IRS sends a default notice with time to catch up. Repeated misses terminate the agreement and reopen collection, so call before missing, not after.
Do I still file next year’s return on time?
Yes — staying current on filing and paying new taxes is a condition of every agreement. New unpaid balances default an existing plan.
As of July 2026, the fee amounts above are the published rates — check the IRS payments page when you apply, since fees are set by regulation and change occasionally.