How to Set Up an IRS Payment Plan?

How to Set Up an IRS Payment Plan?

If you're overwhelmed by a tax bill you can’t pay all at once, the IRS offers payment plans to help you get back on track without facing aggressive collections. This guide explains how to set up an IRS payment plan in 2025, the types available, fees involved, and how to stay in good standing.

What Is an IRS Payment Plan?

An IRS payment plan—officially called an installment agreement—lets you pay off your federal tax debt over time through monthly payments. It's one of the most effective ways to avoid IRS collection actions such as levies, liens, or wage garnishments.

Who Qualifies?

You may qualify for an IRS payment plan if:

  • You owe $50,000 or less in combined tax, penalties, and interest (long-term plan).
  • You owe less than $100,000 and can pay within 180 days (short-term plan).
  • You’ve filed all required tax returns.

Types of IRS Payment Plans

1. Short-Term Payment Plan

For taxpayers who can pay off their balance within 180 days. There's no setup fee, but penalties and interest continue to accrue until the balance is paid in full.

2. Long-Term Payment Plan (Installment Agreement)

For those needing more than 180 days to pay. Monthly payments are required, and setup fees may apply depending on how you apply and how you pay.

Setup Fees in 2025

Application Method Setup Fee
Online (Direct Debit) $31
Online (Other payment methods) $130
By Phone, Mail, or In Person $225 ($107 if using Direct Debit)
Low-Income Taxpayers May qualify for reduced or waived fees

How to Apply

You can apply using one of these methods:

  1. Online: Through the IRS Online Payment Agreement Tool.
  2. Phone: Call the IRS at 1-800-829-1040.
  3. Mail: Submit Form 9465 (Installment Agreement Request).

Information You’ll Need

  • Social Security Number or ITIN
  • Filing status and address
  • Your income and monthly expenses (for long-term plans)
  • Bank account and routing number (for direct debit)

Pros and Cons of IRS Payment Plans

Pros:

  • Avoids collection actions like garnishments or levies
  • Makes large tax bills manageable
  • Online application is quick and convenient

Cons:

  • Penalties and interest continue to accrue
  • Setup fees may apply
  • Missing a payment may lead to default

Staying in Good Standing

Once your plan is approved:

  • Make your monthly payments on time.
  • File all future tax returns by the deadline.
  • Pay any new tax balances on time.

What If You Can’t Afford a Plan?

If even the smallest monthly payment is too much, you might consider:

  • Offer in Compromise: Settle for less than you owe.
  • Currently Not Collectible (CNC): Delay collections if you prove financial hardship.

Final Thoughts

Owing the IRS can feel intimidating, but setting up a payment plan puts you back in control. Apply early, understand your options, and stick to your agreement. If you're unsure which path is right for you, consider speaking with a tax professional or a nonprofit credit counselor for help navigating the process.

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