USTaxPenaltySaverTypes of IRS Payment Plans
The IRS offers several types of payment plans depending on how much you owe, how quickly you can pay, and whether you need financial disclosure. Choosing the right plan type saves you money on setup fees and simplifies the process.
Short-Term Payment Plan: If you can pay your balance within 180 days, this option has no setup fee. Interest and the failure-to-pay penalty continue, but you avoid the additional cost of establishing a formal installment agreement. You can pay in a single payment or multiple payments within the 180-day window.
Long-Term Payment Plan (Installment Agreement): If you need more than 180 days to pay, you need a formal installment agreement. This allows monthly payments for up to 72 months (6 years). Setup fees apply, and interest plus a reduced penalty continue until the balance is paid.
Within long-term plans, there are subcategories: Guaranteed agreements (for balances under $10,000), Streamlined agreements (for balances under $50,000), and Non-streamlined or routine agreements (for balances over $50,000 or special circumstances). Each has different requirements and approval processes.
Guaranteed Installment Agreement
A guaranteed installment agreement is exactly what it sounds like: if you meet the criteria, the IRS must approve your request. You qualify if: (1) Your tax debt is $10,000 or less (excluding interest and penalties), (2) You have filed all required returns and paid all taxes due in the past 5 years, (3) You have not had an installment agreement in the past 5 years, (4) You agree to pay the full balance within 3 years, and (5) You are financially unable to pay the liability in full when due.
The guaranteed agreement is ideal for smaller balances when you have a clean compliance history. Because approval is automatic when you meet the criteria, processing is fast, and there is no financial disclosure required.
Example: You owe $8,000 in tax. You have filed on time for the past 5 years and have never had a payment plan. You request a monthly payment of $230 (which pays off $8,000 in about 35 months). The IRS must approve this agreement.
Streamlined Installment Agreement
Streamlined agreements are the most common type. They apply to individual taxpayers who owe $50,000 or less in combined tax, penalties, and interest. No detailed financial disclosure is required, meaning you do not need to submit Form 433 or document your income and expenses.
For balances of $25,000 or less, you can choose any payment method (check, money order, debit, credit card, payroll deduction, or direct debit). You can set up the agreement online in minutes at IRS.gov/opa.
For balances between $25,001 and $50,000, the IRS requires direct debit (automatic bank withdrawal). This ensures reliable payments and qualifies you for the lower $22 setup fee if you apply online. The payment amount must pay off the balance within 72 months.
Recent change: The IRS has removed the strict 72-month cap for some agreements with Revenue Officers, allowing repayment over the full collection statute (up to 10 years in some cases). This makes payment plans more flexible for taxpayers with larger balances or lower incomes.
Non-Streamlined (Routine) Installment Agreement
If you owe more than $50,000, or if you need special terms, you will need a non-streamlined agreement. This requires submitting Form 433-F (Collection Information Statement) or Form 433-A (for individuals) with detailed information about your income, expenses, assets, and liabilities.
The IRS reviews your financial situation to determine what monthly payment you can afford. They use Collection Financial Standards to cap certain living expenses. If you claim high expenses, be prepared to document them. The IRS may adjust your payment amount based on their analysis.
Processing time for non-streamlined agreements is longer, typically 30 to 60 days or more. During this time, collection is generally suspended if you have submitted a complete application. If you receive collection notices while your application is pending, contact the number on the notice.
Setup Fees and How to Reduce Them
Setup fees for IRS payment plans vary by plan type, payment method, and application method. Applying online and choosing direct debit saves the most money.
Short-term payment plans (180 days or less) have no setup fee regardless of how you apply. This is the cheapest option if you can pay within 6 months.
Long-term installment agreements: Direct debit agreements cost $22 if you apply online, or $107 if you apply by phone, mail, or in person. Non-direct-debit agreements cost $69 online or $178 by phone/mail. The difference between online direct debit ($22) and phone/mail non-direct-debit ($178) is $156.
Low-income fee relief: If your adjusted gross income is at or below 250% of the federal poverty level, you may qualify for a fee waiver. Direct debit agreements get a full waiver. Non-direct-debit agreements get the fee reimbursed upon completion of the agreement. Apply for low-income status using Form 13844 or indicate it in your online application.
Interest and Penalties During a Payment Plan
Interest continues to accrue on your unpaid balance at the current IRS rate (7% for Q1 2026, compounded daily). There is no way to stop interest; it runs until the balance is paid in full. The only way to reduce interest charges is to pay faster.
The failure-to-pay penalty also continues, but at a reduced rate. Normally, the penalty is 0.5% per month (up to 25% total). While an installment agreement is in effect, the rate drops to 0.25% per month. This reduction only applies if you filed your return on time or by the extended deadline.
Example: On a $10,000 balance, the full penalty rate costs $50/month (0.5%), while the reduced rate during an installment agreement costs $25/month (0.25%). Over a 3-year payment plan, that is a savings of $900 in penalties alone, plus you are paying down the principal the whole time.
How to Apply
Online Payment Agreement (recommended): Go to IRS.gov/opa. You can apply for short-term plans or long-term agreements if you owe $50,000 or less. You get immediate notification of approval. This is the fastest and cheapest method.
By phone: Call the IRS at 1-800-829-1040 (individuals) or the number on your notice. Have your return and balance information ready. Processing may take a few days.
By mail: Complete Form 9465 (Installment Agreement Request) and mail it to the IRS. For balances over $50,000 or special circumstances, also include Form 433-F. Processing by mail takes the longest, typically 30 to 60 days.
Before applying, make sure you have filed all required tax returns. You cannot set up a payment plan if you have unfiled returns. Also, if you are currently in bankruptcy, you cannot apply for an IRS payment plan until the bankruptcy is resolved.