The two kinds of plan
| Short-term plan | Long-term plan (installment agreement) | |
|---|---|---|
| Pays the balance | in 180 days or less | in monthly payments |
| Apply online if you owe | less than $100,000 in combined tax, penalties and interest | $50,000 or less, and all required returns are filed |
| Setup fee | $0 | $29 to $178, below |
The IRS lists phone, mail and in-person routes alongside the online application, with the fees below.
Setup fees
| Plan and method | Setup fee |
|---|---|
| Short-term (180 days or less), online | $0 |
| Short-term, phone, mail or in person | $0 |
| Long-term, online, direct debit | $29 |
| Long-term, online, other payment | $69 |
| Long-term, phone, mail or in person, direct debit | $107 |
| Long-term, phone, mail or in person, other payment | $178 |
Direct debit, where the monthly payment is drawn from a bank account automatically, is the cheapest long-term route by either channel. The IRS waives the direct debit setup fee for low-income taxpayers and says the other setup fee may be reimbursed when certain conditions are met.
What keeps running
The IRS states that interest and some penalty charges continue to be added until the balance is paid in full. The failure-to-pay penalty changes rate:
| Situation | Failure-to-pay penalty (IRS) |
|---|---|
| Tax unpaid, no plan | 0.5% of the unpaid tax per month or part of a month |
| During an approved payment plan, return filed on time | 0.25% per month |
| Not paid within 10 days of a notice of intent to levy | 1% per month |
| All cases | no more than 25% of the unpaid tax in total |
The reduced rate depends on the return having been filed on time, which is one more reason to file, or file an extension, by the deadline even when the money is not there; how to file a tax extension works through the larger failure-to-file penalty.
A balance spread out
A balance of $8,000, return filed on time, paid in equal monthly installments. The penalty column applies the 0.25 percent rate to the declining balance; interest, charged separately at the IRS rate, comes on top:
| Term | Monthly payment, before interest | Failure-to-pay penalty over the plan, approx. | Setup fee, online direct debit |
|---|---|---|---|
| 6 months | $1,333 | $70 | $0 |
| 12 months | $667 | $130 | $29 |
| 24 months | $333 | $250 | $29 |
| 36 months | $222 | $370 | $29 |
A 6-month term fits the short-term plan with no fee. The longer terms lower the monthly payment and raise what accrues; the loan calculator adds interest at any rate you enter to see the full cost, and the budget planner shows whether a payment of that size fits.
Before you apply
- File every required return first; the online long-term plan requires it.
- Pay what you can now. Every dollar paid up front stops interest and penalty on that dollar.
- Choose direct debit for the lowest fee and no missed payments.
- Adjust withholding or estimates so next year does not add a new balance; how to fill out Form W-4 and estimated quarterly taxes 2026 cover both.
This guide follows the IRS payment plans and failure-to-pay penalty pages. Fees and eligibility are set by the IRS and can change; the agreement and the IRS notice govern a particular account.
Frequently asked questions
What payment plans does the IRS offer?
Two kinds, per the IRS payment plans page: a short-term plan, paying the amount owed in 180 days or less, and a long-term plan, also called an installment agreement, paying in monthly payments. You can apply online for a short-term plan if you owe less than $100,000 in combined tax, penalties and interest, and for a long-term plan if you owe $50,000 or less and have filed all required returns.
How much does an IRS payment plan cost to set up?
A short-term plan has no setup fee. A long-term plan costs $29 online with direct debit, $69 online with another payment method, $107 by phone, mail or in person with direct debit, and $178 by phone, mail or in person otherwise. Low-income taxpayers have the direct debit fee waived and may have the setup fee reimbursed under conditions the IRS states.
Do penalties and interest stop on a payment plan?
No. The IRS says interest and some penalty charges continue to be added until the balance is paid in full. What changes is the failure-to-pay penalty: for individuals who filed on time, it falls from 0.5 percent to 0.25 percent of the unpaid tax per month during an approved payment plan, still subject to the 25 percent maximum.
Is a short-term or long-term plan better?
Whichever you can actually keep. A short-term plan has no fee and ends interest and penalties sooner; a long-term plan costs a setup fee but spreads the balance into monthly payments. Direct debit is the cheapest long-term option and, the IRS notes, the one whose fee is waived for low-income taxpayers.
What if I miss a payment or get a levy notice?
The failure-to-pay penalty rises to 1 percent a month if the tax is not paid within 10 days of a notice of intent to levy, per the IRS penalty page, so the plan is worth setting up before that point.
Sources
- IRS: Payment plans, installment agreements (short-term plans of 180 days or less and long-term monthly plans; online eligibility under $100,000 and $50,000 or less with all returns filed; setup fees of $0, $29, $69, $107 and $178; low-income waiver and reimbursement; interest and some penalties continue until paid in full)
- IRS: Failure to pay penalty (0.5 percent per month, 0.25 percent during an approved payment plan for those who filed on time, 1 percent after a notice of intent to levy, 25 percent maximum)
General information based on the sources above, not tax, legal or financial advice.