An IRS payment plan is an agreement to pay taxes over an extended time. A short-term plan calls for payment within 180 days; a long-term installment agreement calls for monthly payments.
What to have in front of you
- Your IRS notice, if you received one.
- Your recent statement or payment plan confirmation letter, if you have one.
- Your installment agreement acceptance letter, if you are reviewing a reduced fee.
- Your bank routing and account number, if you want to set up or change direct debit.
- Your payment history and information about required tax returns.
Individuals can view their balance and payment history in their IRS online account. Access requires identity authorization and security checks. The IRS says to allow one to three weeks for a recent payment to be credited, or three weeks for a non-electronic payment.
If you received a notice of intent to terminate your installment agreement, the IRS says to contact it immediately. Use the number printed on your notice.
Your payment options
The IRS lists these options:
- Pay in full now. There is no setup fee.
- Request a short-term plan. The amount is paid in 180 days or less. There is no setup fee, but penalties and interest continue until the balance is paid in full.
- Request a long-term plan. Monthly payments are made under an installment agreement. Setup fees may apply, and penalties and interest continue until the balance is paid in full.
The IRS says a payment plan is an option to request if you believe you can pay in full within the extended time. Your tax situation determines which options are available.
The IRS also says to file required returns on time, even if you cannot pay the balance in full. Interest and a monthly late payment penalty can apply to a balance after the original filing due date.
How to request a plan
Individuals may qualify to apply online for a long-term plan if they owe $50,000 or less in combined tax, penalties and interest and have filed all required returns. Individuals may qualify to apply online for a short-term plan if they owe less than $100,000 in combined tax, penalties and interest.
Only individual taxpayers can apply for a short-term plan online. Sole proprietors and independent contractors apply as individuals. Business taxpayers can call the number on their notice or visit a local Taxpayer Assistance Center.
You can also apply by phone or mail. Individuals who are unable or ineligible to apply online may complete Form 9465, Installment Agreement Request. If its instructions require it, attach Form 433-F, Collection Information Statement. The IRS says installments may still be available if you are ineligible to apply online.
When a request is pending, the IRS is generally prohibited from levying, with certain exceptions. The time the IRS has to collect is suspended or prolonged while the request is pending.
Long-term plan fees
For automatic monthly payments from a checking account, called a Direct Debit Installment Agreement, the setup fee is:
- $29 when applying online.
- $107 when applying by phone, mail or in person.
- Waived for qualifying low-income taxpayers.
For other monthly payment methods, the setup fee is:
- $69 when applying online.
- $178 when applying by phone, mail or in person.
- $43 for qualifying low-income taxpayers, which may be reimbursed if certain conditions are met.
Other methods include payment from a checking or savings account, through an IRS account, or by check, money order, debit card or credit card. Card processing fees apply. The IRS also lists the Electronic Federal Tax Payment System, which requires enrollment.
The IRS uses setup fees to cover the cost of processing installment agreements.
If you think you qualify for a reduced fee
The IRS applies low-income fee rules to eligible individual taxpayers entering long-term plans. If you believe you qualify but the IRS did not identify you as low-income, review Form 13844, Application for Reduced User Fee for Installment Agreements.
To request reconsideration, the IRS says to submit the form within 30 days of the date on your installment agreement acceptance letter. If the IRS system identifies you as low-income, it will automatically reflect the applicable fee.
Review or change an existing plan
Your IRS online account shows your agreement type, due dates and payment amount. You can also use it to change your monthly amount or due date, convert to direct debit, change direct debit bank details, or reinstate a plan after default.
If a proposed monthly amount does not meet the requirements, the online process will prompt you to revise it. If you cannot make the minimum required payment, it will give you directions for completing and submitting the applicable collection information form.
The fee to revise a plan is $6 online or $89 by phone, mail or in person. Different fees may apply to low-income taxpayers. Changes to existing direct debit installment agreements have a $0 fee. A reinstatement fee may apply after default.
Keeping a plan in place
The IRS says to make at least the minimum monthly payment by its due date, file required returns on time and pay taxes in full and on time. Contact the IRS about changing your agreement if you cannot do that.
The IRS will apply future refunds to the tax debt until it is paid in full. Continue making scheduled payments even if a refund is applied. If you mail a payment, use the address in your correspondence.
Where this comes from
IRS: What is a payment plan?