IRS Payment Plans: The Basics

If you find that you owe a significant amount of money to the government when filing your income tax return, you may not be able to pay the full amount right away. The Internal Revenue Service (IRS) knows that not every taxpayer has the ability to pay large tax bills upfront — that’s where IRS payment plans come in. In this article, we’ve broken down everything you need to know about IRS payment plans for tax debt so you can decide if it’s the best option for your financial situation.

At a glance:

• Enrolling in an IRS payment plan can help you avoid any IRS levy action or a notice of federal tax lien.
• Short-term and long-term payment plan options are available.
• Many payment plans require a set-up fee, and penalties and interest will continue to accrue until the balance is paid in full.

What are IRS payment plans?

IRS payment plans allow you to pay your tax bill in installments. You can choose a short-term or long-term payment plan and pay using various methods. Keep in mind that the IRS will charge you penalties, interest, and fees for setting up your plan. Interest rates can vary — see the IRS Interest page for additional information.

What do I need to apply for a payment plan?

The easiest method is to apply for an online payment agreement on the IRS website. When applying, you will need to provide certain information, including your name, email address, home address, birth date, filing status, and Social Security number or ITIN. You may also need to provide the balance due based on the agreement you request.

To make the process easier, TaxAct® can help you set up an IRS payment plan when you e-file using our tax preparation software.

How do I make payments?

If you fall into either of the following categories, you will need to pay through Direct Debit, where the IRS takes automatic monthly payments from your bank account:

• You’re an individual taxpayer with a balance over $25,000
• You’re a business owner with a balance over $10,000

If your balance is below the above amount, you have the following options for both short-term payment plans and long-term plans called installment agreements:

• Pay directly from a checking account or savings account through Direct Pay.
• Pay electronically online or by phone using the Electronic Federal Tax Payment System (EFTPS), which requires enrollment.
• Pay by check, money order, or debit/credit card (note that fees will apply if you choose to pay by card).

What are the payment plan fees?

Different fees apply based on the type of plan you choose:

• Short-term payment plans: Short plans of 180 days or less have a $0 set-up fee, but penalties and interest will continue to accrue until the balance is paid in full.
• Long-term Direct Debit Installment Agreement: Online application fees differ based on how you apply. If you are making Direct Debit payments with an installment plan, the fee is $31 when applying online or $107 when applying by phone, mail, or in person. If you qualify as a low-income taxpayer, your set-up fees can be waived if you apply online, by phone, or in person. You will also need to pay any accrued penalties and interest until the balance is paid in full.
• Long-term payment plan (not Direct Debit): Online application fees differ based on how you apply. The fee is $130 when applying online or $225 when applying by phone, mail, or in person. If you qualify as low-income, your set-up fees can be lowered to $43 if you apply online, by phone, or in person, and you may be able to get the fee reimbursed if you meet certain conditions. You will also need to pay any accrued penalties and interest until the balance is paid in full.

Whenever you want to change an existing payment plan, such as updating your payment amount, due date, or payment method, you will pay a $10 fee online or an $89 fee if you revise it by phone, mail, or in person. If you qualify for low-income status, the fees are $10 and $43, respectively, but these could be reimbursed if you qualify.

How do I check my balance?

When you set up your payment plan, you’ll create an online account with IRS.gov. From there, you can log in via the View Your Account Information page to see your balance. It may take one to three weeks for a recent payment to be credited to your account. If you owe taxes for more than one year, you will see your balances broken down by year.

Paying your taxes with TaxAct

If you’re ready to file your taxes, TaxAct is here for you. Our tax software will walk you through the filing process, and we can help you easily request an IRS payment plan if it’s right for your tax situation.

This article is for informational purposes only and not legal or financial advice.

All TaxAct offers, products and services are subject to applicable terms and conditions.