Can't Pay Your Full Tax Bill?
You have options. The IRS would rather collect money over time than force collection actions — so they've made installment agreements relatively easy to set up, especially for balances under $50,000.
The most important rule: File your return on time (or get an extension) even if you can't pay. The failure-to-file penalty (5%/month) is 10× worse than the failure-to-pay penalty (0.5%/month).
Two Types of IRS Payment Plans
Short-Term Payment Plan (180 days or less)
- Eligibility: Owe $100,000 or less in combined tax, penalties, and interest
- Setup fee: $0
- Best for: Taxpayers who can pay in full within 6 months
- How to apply: Online at irs.gov/opa
Long-Term Installment Agreement (over 180 days)
- Eligibility: Owe $50,000 or less (online); over $50,000 requires Form 9465 by mail
- Setup fee: $22–$130 (see table below)
- Best for: Anyone who needs more than 6 months
- Maximum term: 72 months (6 years)
Setup Fees
| Method | Direct Debit | Standard (check/card) |
|---|---|---|
| Online application | $22 | $69 |
| Phone / mail / in-person | $107 | $178 |
| Low-income waiver | $0 | $0 (if approved) |
Low-income waiver: If your income is at or below 250% of the federal poverty level, the setup fee is waived and you may qualify for reduced fees on accrued interest.
What It Costs to Be on a Payment Plan
The IRS still charges interest and penalties while you're in a plan — it doesn't pause them.
| Charge | Rate |
|---|---|
| IRS interest rate | Federal short-term rate + 3% (~7–8% annually, compounded daily) |
| Failure-to-pay penalty | 0.25%/month (reduced from 0.5% while in active agreement) |
Example: $10,000 balance on a 24-month plan at 7.5% annual interest ≈ $785 in total interest + ~$600 in reduced penalties. Total cost of the plan: roughly $1,385 above your original tax bill.
How to Apply Online (Step-by-Step)
- Go to irs.gov/opa (IRS Online Payment Agreement)
- Click "Apply/Revise as Individual"
- Verify your identity (SSN, date of birth, filing status, prior year AGI)
- Choose short-term (no fee) or long-term (fee applies)
- Select direct debit (lower fee) or standard payment
- Set your monthly payment amount and start date
- Receive instant confirmation
The whole process takes about 10 minutes.
Other Options If You Can't Pay
| Option | Best for | Notes |
|---|---|---|
| Installment Agreement | Most taxpayers | Easy to set up online |
| Currently Not Collectible | Severe financial hardship | IRS pauses collection temporarily |
| Offer in Compromise | True inability to pay | IRS may settle for less than owed; strict qualification |
| Penalty Abatement | First-time or reasonable cause | Removes penalties (not interest); call IRS or file Form 843 |
Use our Tax Refund Estimator to see exactly how much you owe before contacting the IRS.