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How to Set Up a Payment Plan with the IRS

Setting up a payment plan (installment agreement) with the IRS is a straightforward process that allows you to pay your tax debt over time when you can’t pay in full immediately. Here’s a comprehensive guide on how to establish an IRS payment plan.

Available Payment Plan Options

The IRS offers several types of payment plans:

Short-Term Payment Plan (180 Days or Less)

For taxpayers who have a total balance less than $100,000 in combined tax, penalties and interest. This plan gives them an extra 180 days to pay the balance in full. IRS Newsroom – IR-2024-243 This option is available for individual taxpayers who owe less than $100,000 in combined tax, penalties, and interest. IRS.gov Tax Topics

Long-Term Payment Plan (Monthly Installments)

For taxpayers who have a total balance less than $50,000 in combined tax, penalties and interest. They can make monthly payments for up to 72 months. IRS Newsroom – IR-2024-243 Generally, individual taxpayers who owe a total of $50,000 or less, and can pay it off in 72 monthly payments or less, can set up their payment plan using our online applications. IRS – Publication 5123: Got a tax bill you can’t pay?

Business Payment Plans

Business taxpayers who owe $25,000 or less from the current and prior calendar year, and who can pay it off in 24 monthly payments or less, may also qualify to use an online application. IRS – Publication 5123: Got a tax bill you can’t pay?

How to Apply for a Payment Plan

You have several options for setting up a payment plan with the IRS:

1. Apply Online (Fastest Method)

If the taxpayer is a qualified taxpayer, they can apply for a payment plan (including installment agreement) online to pay off their balance due over time. Employees may refer the taxpayer to IRS.gov to determine if they qualify and Apply Online for a Payment Plan. IRS IRM 4.24.16 Excise Fuel Compliance Report Writing, Case Processing and Appeals Procedures

Taxpayers can meet their tax obligation in monthly installments by setting up a payment plan on IRS.gov/paymentplan in a matter of minutes. Setup fees may apply for some types of plans. IRS Newsroom – IR-2022-35 – Tax Time Guide: Make IRS.gov the first stop for tax help

Most taxpayers do qualify for an IRS payment plan (or installment agreement) and can use the online payment agreement (OPA) to set it up to pay off a balance over time. Taxpayers receive immediate notification of whether the IRS has approved their payment plan when they apply online. IRS Newsroom – IR-2024-243

2. Submit Form 9465 (Installment Agreement Request)

To request a payment plan, use the OPA application, complete Form 9465, Installment Agreement Request, and mail it to us, or call the appropriate telephone number listed below. IRS.gov Tax Topics

You can apply for a payment plan online or you may complete Form 9465, Installment Agreement Request and mail it in with your bill. You may also request an installment agreement over the phone by calling the phone number listed on your balance due notice. IRS.gov Tax Topics

3. Call the IRS

You can call the phone number on your tax bill or notice to discuss payment plan options with an IRS representative.

Payment Methods Available

The IRS offers various options for making monthly payments:

• Direct debit from your bank account,
• Payroll deduction from your employer,
• Payment by EFTPS,
• Payment by credit card or debit card via phone or Internet,
• Payment via check or money order,
• Payment with cash at a retail partner. IRS.gov Tax Topics

Setting Up Your Payment Plan

When setting up your payment plan, you’ll need to:

• Determine how much you can pay monthly: Be realistic about what you can afford.
• Choose a payment due date: For all agreements: request that the taxpayers select a day of the month, from the 1st through the 28th, for the payment due date. IRS IRM 5.14.1 Securing Installment Agreements
• Provide financial information: Use the tiered interview to determine the taxpayer’s ability to pay and include the following dialogue: The total amount owed which includes tax, estimated interest, and penalties is $ amount. If you are not able to pay in full today, what is the maximum amount you can pay? Can you make full payment upon receipt of the first notice? IRS IRM 4.20.1 Examination Collectibility Procedures IRS IRM 4.20.1 Examination Collectibility Procedures
• Consider varied payment schedules if needed: Payment schedules may incorporate varied payments. Support varied payment schedules with documentation. Examples of reasons for varied payment schedules include, but are not limited to: Anticipated fluctuations in business cycles for businesses or “commission” employees, Contract employment, Self employment, Seasonal employment, Seasonal expenses (for example, child-care costs when school is out), Planned (scheduled) changes in employment status, such as plans to work part-time, or reduced schedules, especially if the changes are made in order to facilitate a parent staying home with children, even if this means making numerous changes to monthly payment amounts over a period of time. IRS IRM 5.14.1 Securing Installment Agreements

Fees and Costs

There’s a user fee to set up an installment agreement. For low-income taxpayers, the user fee is reduced and possibly waived or reimbursed if certain conditions apply. Interest and late payment penalties up to the maximum allowed by law will continue to accrue while you make installment payments. IRS.gov Tax Topics

After Your Payment Plan is Established

On IDRS monitored agreements, a monthly payment reminder notice (CP 521) will be mailed to taxpayers two cycles before each payment due date, except in the case of DDIAs. A pre-addressed envelope is included with the notice. In the case of payroll deduction IAs (PDIAs), inform the taxpayer that even though the payments are being sent by their employer, they will receive a monthly reminder notice for their records. IRS IRM 5.14.1 Securing Installment Agreements

Important Considerations

• Filing your return is still required: Filing your return and paying what you owe on time is always best. That way, you avoid penalties and interest. If you can’t pay your bill in full, file on time and pay what you can to keep your penalties and interest to a minimum. Once you have filed your return, visit IRS.gov to see if you can set up a payment plan for the balance. IRS – Publication 5123: Got a tax bill you can’t pay?
• Penalties and interest continue: Even with a payment plan, penalties and interest continue to accrue until your balance is paid in full.
• Keep making payments: Missing payments can cause your agreement to default.
• Update your information: If your financial situation changes, contact the IRS to modify your agreement.
• File all required returns: You must stay current with all filing and payment requirements to maintain your installment agreement.

Legal Status of Installment Agreements

A proposed installment agreement must be submitted according to the procedures, and in the form and manner, prescribed by respondent. Treas. Reg. sec. 301.6159-1(b). A proposed installment agreement becomes pending when respondent accepts it for processing, and remains pending until respondent accepts the proposal, notifies the taxpayer that the proposal has been rejected, or the taxpayer withdraws the proposal. Treas. Reg. sec. 301.6159-1(b)(2). A proposed installment agreement is not accepted by respondent until he notifies the taxpayer or taxpayer’s representative of its acceptance. Treas. Reg. sec. 301.6159-1(c)(1)(i). Dawson U.S. Tax Court Opinions: Raj B. Singh

Except in limited circumstances not applicable in this case, respondent has discretion to accept or reject installment agreement proposals. Treas. Reg. secs. 301.6159-1(c)(1)(i) & (c)(1)(iii). Dawson U.S. Tax Court Opinions: Raj B. Singh

An installment agreement must be in writing and must take the form of either (1) a document signed by the taxpayer and respondent (such as a Form 433-D) or (2) a written confirmation of an agreement entered into by the taxpayer and respondent that is mailed or personally delivered to the taxpayer. Sec. 6159(a); Treas. Reg. sec. 301.6159-1(c)(2). Dawson U.S. Tax Court Opinions: Raj B. Singh

Conclusion

Setting up a payment plan with the IRS is a practical solution when you can’t pay your tax debt in full. The online application process is quick and convenient for most taxpayers, providing immediate approval in many cases. Remember that even with a payment plan, it’s in your best interest to pay off your tax debt as quickly as possible to minimize penalties and interest.If you need assistance with setting up a payment plan, you can visit IRS.gov/paymentplan, call the number on your tax bill, or consult with a tax professional who can guide you through the process.