How to Set Up an IRS Payment Plan When You Cannot Pay Your Taxes in Full

File on time and pay as much as you can

If you cannot pay your federal tax bill in full, the IRS advises you to file your return on time and pay as much as possible.

Failing to file can create a separate and substantially larger penalty than simply failing to pay. An extension to file does not normally extend the deadline for paying the tax.

Once you know the remaining balance, you can determine whether an IRS short-term payment plan or monthly installment agreement fits your situation.

Choose a short-term plan or monthly installment agreement

Individual taxpayers generally have two principal self-service options:

• Short-term payment plan: pay the entire balance within 180 days or less.
• Long-term payment plan: make monthly payments through an installment agreement.

These plans do not reduce the amount of tax legally owed. They give you additional time to pay while interest and applicable penalties continue to accrue.

A short-term plan can provide up to 180 days with no setup fee

An individual taxpayer may qualify to apply online for a short-term payment plan when they owe less than $100,000 in combined tax, penalties and interest.

The balance must be paid in full within 180 days or less.

There is no setup fee for the short-term plan, whether it is established online or through another eligible IRS route. Interest and applicable penalties continue until the balance reaches zero.

After establishing the plan, payments can be made using IRS Direct Pay, an IRS Online Account, EFTPS, check, money order or an approved debit or credit card processor. Card processors charge separate processing fees.

Most individuals owing $50,000 or less can use the simplified monthly plan

The IRS now calls its common streamlined long-term option a Simple Payment Plan.

For individuals, general eligibility requires:

• $50,000 or less in assessed tax, penalties and interest; and
• being current with required federal tax filing and payment obligations.

The IRS states that more than 90% of individual taxpayers seeking payment plans qualify for this simplified option.

A Simple Payment Plan normally does not require a collection information statement, lien determination or trust fund recovery penalty determination.

The debt generally must be paid before the IRS collection period expires

Most taxpayers have up to the remaining federal collection period to pay under a Simple Payment Plan. The IRS explains that this period is generally 10 years from the date the tax was assessed.

Your proposed monthly amount must therefore be sufficient to pay the covered liability within the applicable Collection Statute Expiration Date.

A longer payment period generally means more interest and penalties accumulate before the debt is fully paid.

Use the IRS Online Payment Agreement application

Qualified individual taxpayers can establish a payment plan through the IRS Online Payment Agreement application.

To apply online, you need an IRS Online Account. The IRS requires photo identification when creating the account.

If you recently filed a return or had an examination and have not yet received an IRS balance notice, the online application may ask you to enter the balance shown on the return.

When you complete the online application, the IRS provides an immediate notification stating whether the requested payment plan has been approved.

Online installment agreement fees depend on how you pay

IRS installment agreement fees changed for some online agreements effective July 5, 2026.

As of September 4, 2026, the current fees for an individual long-term agreement are:

• $29 when an online agreement uses automatic Direct Debit;
• $69 for an online agreement using non-Direct-Debit monthly payments;
• $107 for a Direct Debit agreement established by phone, mail or in person; and
• $178 for a regular non-Direct-Debit agreement established by phone, mail or in person.

The short-term plan of 180 days or less continues to have a $0 setup fee.

Low-income individuals may qualify for waived or reimbursed fees

Special fee rules apply to qualifying low-income individual taxpayers.

For installment-agreement fee purposes, the IRS generally uses adjusted gross income at or below 250% of the applicable federal poverty level.

A qualifying low-income taxpayer who agrees to electronic Direct Debit receives a $0 installment agreement setup fee.

If a qualifying low-income taxpayer does not use Direct Debit, the reduced fee is generally $43 and may be reimbursed after successful completion of the agreement when the IRS requirements are satisfied.

Use Form 13844 if the IRS did not identify you as low income

If the IRS does not automatically identify you as eligible for the low-income fee rules, you can submit Form 13844, Application for Reduced User Fee for Installment Agreements.

The current IRS guidance instructs taxpayers to submit Form 13844 within 30 days from the date of the installment agreement acceptance letter when requesting reconsideration of low-income status.

Automatic bank withdrawals reduce the setup fee and missed-payment risk

A Direct Debit Installment Agreement (DDIA) automatically withdraws the agreed payment from your checking account every month.

To establish Direct Debit, provide:

• your bank routing number;
• your checking or savings account number; and
• authorization for the IRS to initiate the monthly withdrawal.

Direct Debit carries a lower online setup fee and reduces the risk that you forget a payment.

You can make monthly payments without Direct Debit

An approved long-term agreement can also use non-automatic monthly payments.

Current IRS payment methods include:

• IRS Direct Pay from a bank account;
• payment through your IRS Online Account;
• Electronic Federal Tax Payment System, or EFTPS;
• check or money order; and
• approved debit or credit card processors.

Debit and credit card processors charge separate transaction fees that are not part of the IRS installment agreement setup fee.

Form 9465 provides the official paper application route

If you cannot or do not want to establish the agreement online, the IRS provides Form 9465, Installment Agreement Request.

Form 9465 can be used to request monthly payments for a tax balance shown on a return or an IRS notice.

You may also be able to request an agreement by calling the telephone number on an IRS notice or, depending on your circumstances, visiting a Taxpayer Assistance Center.

Phone, mail and in-person agreements generally carry higher setup fees than agreements established online.

Online applications are immediate while mailed requests take longer

The Online Payment Agreement application provides an immediate determination after you complete the request.

If you mail Form 9465, the IRS states that it typically responds within 30 days, although the response can take longer during filing season.

A payment plan does not erase tax debt while you wait, so continue paying as much as possible.

The payment must satisfy the IRS collection period

When requesting a monthly installment agreement, you specify an amount you can pay and the monthly due date.

The IRS allows installment due dates from the 1st through the 28th day of the month.

Your payment must reach the IRS by the selected date.

For a Simple Payment Plan, the proposed payment must generally be sufficient to pay the liability before the applicable collection statute expires.

The IRS may ask for financial information

If the online system determines that your proposed payment does not meet its requirements, it will ask you to increase the amount or follow another process.

Depending on the case, the IRS may require:

• Form 9465 plus Form 433-F, Collection Information Statement; or
• Form 433-H, which combines an installment agreement request with a collection information statement.

Taxpayers who do not qualify for a Simple Payment Plan may still be eligible for another installment agreement after the IRS reviews their finances.

Interest continues until the tax balance is paid in full

An IRS payment plan does not stop interest.

Federal tax underpayment interest compounds daily and is set quarterly. For the third quarter of 2026, covering July through September, the IRS underpayment interest rate is 7% per year. The IRS has also announced a 7% underpayment rate for the fourth quarter beginning October 1, 2026.

Because the rate is recalculated quarterly, the rate applying later in a long-term agreement can change.

An approved plan can reduce the monthly late-payment penalty

The normal federal failure-to-pay penalty is generally 0.5% of unpaid tax for each month or part of a month the balance remains unpaid, up to the statutory maximum.

For an individual who filed the return on time and has an approved installment agreement, the IRS states that the failure-to-pay penalty is generally reduced to 0.25% per month or part of a month while the agreement is in effect.

Interest continues in addition to applicable penalties.

Do not skip filing because you cannot pay

Being unable to pay the tax does not eliminate the requirement to file a tax return.

The failure-to-file penalty is generally much larger than the ordinary failure-to-pay penalty. The IRS therefore advises taxpayers to file on time even when they cannot pay in full.

For returns required to be filed in 2026, the IRS states that a return more than 60 days late can be subject to a minimum failure-to-file penalty equal to the lesser of $525 or 100% of the unpaid tax, subject to the applicable rules.

Federal collection action is restricted in many pending cases

Federal law provides collection protections while a qualifying installment agreement request is pending.

The IRS states that, with certain exceptions, it is generally prohibited from levying while an installment agreement request is pending.

If the IRS rejects the requested agreement, the collection period is generally suspended for 30 days. Similar protections apply after the IRS proposes termination of an agreement and while a timely appeal is pending.

These protections do not cancel the debt, interest or applicable penalties.

Pay each installment and stay current on new taxes

An installment agreement can default if you fail to follow its terms.

To protect the agreement:

• make each payment in full and by the agreed date;
• file all future required returns on time;
• pay current taxes as they become due;
• maintain sufficient funds for Direct Debit withdrawals; and
• contact the IRS promptly if you cannot meet the existing terms.

Adding new unpaid federal tax debt while an agreement is active can create problems with the existing arrangement.

Many agreement details can be revised without starting over

Eligible individual taxpayers can use the Online Payment Agreement application to review or revise an existing plan.

Online changes can include:

• changing the monthly payment amount;
• changing the monthly due date;
• converting to Direct Debit;
• changing the bank routing or account number for Direct Debit; and
• reinstating certain agreements after default.

Fees may apply when an agreement is restructured or reinstated.

Larger tax debts may still qualify for another arrangement

Owing more than $50,000 does not automatically mean the IRS will refuse all monthly payment arrangements.

Instead, you may be required to work directly with the IRS and provide detailed financial information. A collection information statement and a determination concerning a federal tax lien may be required.

Call the number on your IRS notice or follow the instructions given by the Online Payment Agreement system.

Open bankruptcy cases require separate IRS handling

Taxpayers in an open bankruptcy proceeding are generally not eligible through the ordinary installment agreement process.

The IRS states that payment options during bankruptcy depend on the chapter, court jurisdiction and status of the bankruptcy case. Taxpayers in bankruptcy should use the IRS bankruptcy contact process for case-specific guidance rather than submitting an ordinary online payment-plan request.

Some taxpayers owing $10,000 or less have statutory protections

Federal law provides a Guaranteed Installment Agreement in certain qualifying individual cases.

Current IRS guidance identifies requirements including:

• income tax owed of $10,000 or less, excluding interest and penalties;
• timely filing and payment compliance during the previous 5 years;
• no income-tax installment agreement during that 5-year period;
• agreement to pay the balance within 3 years;
• future compliance with federal tax laws; and
• financial inability to pay the tax immediately.

This is different from the more broadly available Simple Payment Plan.

Avoid unnecessary penalties, fees and defaults

• Not filing the return because you cannot pay: file on time and address payment separately.
• Ignoring part of the balance: review tax, penalties and interest when checking eligibility thresholds.
• Choosing a costly application method unnecessarily: online setup fees are generally lower than phone, mail or in-person fees.
• Assuming a payment plan stops interest: interest continues until the balance is fully paid.
• Assuming all penalties stop: applicable penalties continue, although the failure-to-pay rate may be reduced while a qualifying agreement is active.
• Choosing an unrealistic monthly amount: the IRS requires the balance to be paid within the applicable collection period.
• Missing Direct Debit withdrawals: insufficient funds can jeopardize the agreement.
• Creating new unpaid tax debt: remain current with future federal tax obligations.
• Paying a private company just to submit the application: eligible individuals can apply directly through the IRS.

Use the shortest affordable repayment period

If you can pay the balance within 180 days, the short-term plan avoids an IRS setup fee.

If you need more time, an online monthly installment agreement is generally less expensive to establish than applying by phone, mail or in person, and Direct Debit has the lowest standard online setup fee.

Whatever option you choose, paying more sooner reduces the amount of interest and penalties that accumulate before the federal tax debt is eliminated.