How to set up an IRS payment plan

Before you start

A payment plan, formally called an installment agreement, lets you pay a tax balance over time. It does not erase the debt. The IRS says penalties and interest continue until the balance is paid, so a plan is a way to organize payments, not to lower what you owe.

Think through what you can pay each month before you apply, and confirm that every required return has been filed. The IRS online application is for simple situations, and thresholds, fees and eligibility change, so check the IRS page for current figures rather than relying on this page.

Plan types at a glance

The IRS describes three broad options. Choose based on how long you realistically need.

• Pay now: full payment of the balance
• Short-term plan: a payment period that is brief, offered online and by other methods
• Long-term monthly plan: set monthly payments, with direct debit usually the most convenient

Online or paper

Individuals who qualify can apply through their IRS Online Account. The IRS says online applications for a simple long-term plan are available where combined tax, penalties and interest are $50,000 or less and all returns are filed. Business accounts cannot apply online and are directed to call the number the IRS gives.

If you cannot apply online, individuals can request a monthly plan by mailing Form 9465 or by phone at 800-829-1040. You may be asked for a financial statement such as Form 433-F. The IRS lists higher fees for phone, mail and in-person requests than for online ones, and the page also describes reduced fees for people with low income, so look at the current fee page before you choose.

What can go wrong

Defaulting on a plan can bring a reinstatement fee, continued penalties and interest, application of future refunds to the debt, and possibly a lien or levy. The IRS generally does not take enforced collection while a plan request is under consideration or in effect, for 30 days after a rejection or termination, or while an appeal of the rejection is pending.

If a plan is rejected or terminated, the Collection Appeals Program can be used, with a stated window of 30 days. IRS Audit Defense Pro is software that helps you organize your facts and draft a response letter you review and send yourself. It is not a law firm, CPA or enrolled agent, and it gives no legal or tax advice.

Step by step

1. Confirm what you owe and which returns are missingCheck your balance in your IRS Online Account or on your notice. File any outstanding returns first, since a plan generally requires all returns to be filed.
2. Work out a monthly amount you can sustainList income and necessary expenses. A plan you cannot keep leads to default, so choose an amount you can meet every month.
3. Compare short-term and monthly plansA short-term plan suits a balance you can clear soon. A monthly plan suits a longer horizon. Review the current IRS fee table before deciding.
4. Apply online if you canSign in to your IRS Online Account, start the payment agreement application and follow the prompts. The application will show the plan choices available to you.
5. Use Form 9465 or call if online is not an optionComplete Form 9465 and mail it as directed, or call 800-829-1040. Have your financial details ready, and expect that Form 433-F may be requested.
6. Save confirmation of the agreementKeep the confirmation, the monthly amount, the due date each month and the terms.
7. Make every payment on time and file on timeKeep future returns filed and future taxes paid. New balances can put an agreement at risk.
8. Know your options if the plan is rejectedRead the rejection letter for appeal instructions. The Collection Appeals Program, requested on Form 9423, is one route.

Frequently asked questions

Sources

• IRS: Online payment agreement application
• IRS: Payment plans and installment agreements
• IRS: About Form 9465

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