How to Setup an IRS Payment Plan
An installment agreement allows you to pay your tax debt over time
Maybe something unexpected happened toward the end of the year to affect your tax situation, or maybe you made a mistake when you filled out your W-4 for your new employer. It's tax time, you've just completed your return...and you realize that you owe the IRS money. The IRS offers a variety of payment options if you don't have enough cash on hand to pay immediately, including an installment payment plan.
Setting up a payment plan with the IRS is fairly easy. Either you or your tax professional can arrange for an IRS installment agreement to settle your tax debt in small, more manageable increments.
What You'll Need to Apply
Make sure you have certain documents and information on hand when you apply for an installment agreement. You should be able to provide an email address, and you'll need a bank account number, a cellphone number, or an activation code from the IRS to verify your identity.
It can take up to 10 business days to get the code, so contact the IRS as soon as possible if you don't have a mobile phone or bank account you can use instead.
You'll additionally need:
- Your name and address exactly as it appears on your most recent tax return
- Your filing status
- Your date of birth
- Your Social Security or Individual Tax ID number
How to Set up a Payment Plan
First, determine how much you owe in unpaid taxes. You can check your copies of your tax returns to verify the amount, but it's better to contact the IRS because the total will most likely include both your original tax due plus penalties and interest.
Complete Form 9465, the "Installment Agreement Request." You can access it using the Online Payment Agreement Application on the IRS website if your tax debt is $50,000 or less, including interest and penalties. Otherwise, you can download and complete the paper form from the IRS website and mail it in along with IRS Form 433-F, the Collection Information Statement.
It might not be necessary to file Form 433-F in addition to Form 9465 if you owe $25,000 or less.
The Cost of an Installment Plan
The IRS charges a user fee to set up a payment plan. It's $31 for a new plan with direct debit if you apply for a plan online as of 2020. This increases to $107 for a new direct debit plan if you apply by phone, mail, or in-person.
If you want to apply for an installment agreement without direct debit, it's $149 to apply online or $225 to apply via phone, mail, or in-person. If you need to revise an existing payment plan, it's $10 to revise online or $89 to revised by phone, mail, or in-person.
Low-income taxpayers are eligible for special, lower rates.
You can also request an installment agreement over the phone. Simply call the IRS at 1-800-829-1040. They'll send you the necessary paperwork to fill out.
The IRS won't approve your installment agreement if you haven't yet filed all your tax returns. You must be current before requesting a monthly payment plan.
Sole proprietors and independent contractors should apply as individuals, not as businesses.
If you're due a refund in future years, you won't receive it if you're currently paying off a tax debt under an installment agreement with the IRS. Your refund will be applied to your installment agreement balance.
Don't Miss a Payment
Mail your monthly payment to the IRS about seven to 10 days before the due date you've set up if you're paying by check or money order. You want to be sure that the IRS receives it on time. When mailing a check or money order to the IRS, you should send it via certified mail so you'll have proof that you mailed your payment by the due date. The IRS doesn't accept First Class Mail postmarks as proof that a payment (or tax return) was mailed on time.
The easiest and safest payment method is IRS Direct Pay, which is available online. Just log in with your identifying information, select "installment agreement" from the drop-down menu, and enter your payment along with your bank account information. You'll receive a confirmation number immediately when your transaction is complete.
Contact the IRS as soon as possible to avoid possible collection actions if you know you're not going to be able to make an installment agreement payment. The IRS will generally work with you.
The IRS also offers short-term payment plans if you think you can pay off your tax debt in 120 days or less, and if the amount you owe is less than $100,000. The installment agreement is considered a long-term payment plan.
IRS. "Additional Information on Payment Plans." Accessed Oct. 26, 2020.
IRS. "Apply Online for a Payment Plan." Accessed Oct. 26, 2020.
IRS. "View Your Tax Account." Accessed Oct. 26, 2020.
IRS. "Instructions for Form 9465 (12/2019)." Accessed Oct. 26, 2020.
IRS. "Refund Inquiries." Accessed Oct. 26, 2020.
Journal of Accountancy. "Offside Penalty—IRS." Accessed Oct. 26, 2020.