Millions of taxpayers face the challenge of owing the IRS and being unable to pay in full by the due date each year. Unexpected expenses, underpayment of estimated taxes, or financial setbacks can quickly result in a tax liability that feels unmanageable. Fortunately, the Internal Revenue Service (IRS) provides structured solutions that allow individuals and businesses to address unpaid taxes through official installment agreements, helping to prevent immediate financial strain.
An IRS payment plan—formally known as an installment agreement—enables taxpayers to pay off their balance in manageable monthly installments rather than in a single lump sum. These plans are especially helpful for working taxpayers and small business owners who cannot pay in full but want to avoid accumulating penalties or interest or facing aggressive collection actions. By spreading the tax obligation over several months, an installment agreement offers financial breathing room while protecting essential household and business cash flow.
This guide explains the key aspects of IRS payment plans, including eligibility requirements, the application process, and the forms you may need, such as Form 9465: Installment Agreement Request. It will also outline the benefits of maintaining a payment plan in good standing, such as reduced risk of levies or wage garnishments, predictable monthly payments based on your financial condition, and the ability to preserve savings for other critical expenses. With the right approach, an IRS installment agreement can serve as an effective tool for resolving tax debt while maintaining financial stability.
An IRS payment plan, officially an installment agreement, allows taxpayers to pay their tax debt over time in fixed monthly payments. Suppose you cannot pay your full tax liability by the due date. In that case, this payment agreement offers a manageable solution to avoid immediate collection action from the IRS.
When you apply for an installment agreement online or submit Form 9465: Installment Agreement Request, you enter into a legal contract with the IRS. This agreement outlines the total balance you owe, your monthly payment amount, and the date your plan begins.
A valid agreement can prevent wage garnishments, bank levies, and property seizures if you comply with the plan.
A monthly installment plan lets you divide your unpaid taxes into affordable chunks, protecting your income and savings account.
Making timely payments and filing all future tax returns keeps your account in excellent standing.
Once approved, the IRS sends written confirmation outlining the agreement terms.
If your income drops, you can submit a Collection Information Statement to request a lower minimum monthly payment.
This option helps taxpayers settle what they owe while avoiding escalating penalties and interest the IRS charges on overdue balances.
The IRS offers two main types of payment plans: short-term and long-term. Each option provides flexibility depending on how much tax debt you owe and your ability to make monthly payments.
A short-term plan allows taxpayers up to 180 days to pay their full tax liability. This plan is ideal if you can resolve your balance quickly but need a brief extension.
A long-term plan, also called an installment agreement, allows you to make regular monthly installment payments over a period longer than 180 days.
Overview of Monthly Payments
When to Consider This Option
Both plans can be requested online or by submitting a complete installment agreement request by mail.
Before applying for an IRS payment plan, it's important to determine eligibility based on your tax debt, filing history, and ability to make regular monthly payments. The IRS has specific rules for both short-term and long-term installment agreements.
To qualify for a short-term payment agreement, you must meet the following conditions:
Amount Owed
Return Filing Status
Short-term plans are best for taxpayers who can pay their unpaid taxes in full within 180 days without causing significant financial hardship.
Long-term installment agreements are designed for taxpayers who need more time to pay.
The criteria differ slightly for individuals and businesses:
Individuals vs. Businesses
Required Tax Filings and Payment Capacity
Meeting these criteria improves your chances of securing an approved agreement.
The IRS offers several specialized installment agreement types to help taxpayers with varying financial conditions and levels of tax debt. These options provide additional flexibility beyond standard payment plans.
Eligibility Criteria and Automatic Approval Terms
You may qualify for a guaranteed installment agreement if you owe $10,000 or less (excluding penalties and interest).
To be eligible, you must have filed all required tax returns for the past five years and not entered into a prior installment payment agreement.
You must also be able to pay the full balance within three years and agree to comply with all tax laws during the payment period. If all conditions are met, the IRS is required to approve your request.
Debt Thresholds
Streamlined agreements are available if you owe $50,000 or less (individuals) or $25,000 or less (businesses).
Direct Debit Requirements
For balances above $25,000, you must authorize monthly payments through a financial institution using direct debit.
No Financial Documentation Needed in Some Cases
If you meet the debt and payment criteria, no Collection Information Statement is required to complete your request.
Designed for Financial Hardship
This option helps those who cannot pay their full tax liability before the statute of limitations expires.
Requires Full Financial Disclosure
You must submit detailed financial data to support your claim.
May Result in Partial Forgiveness
Some debt may be canceled if you continue to pay through the expiration of the tax period.
You can request an installment agreement through one of three methods: online, by mail, or by phone. Each method has specific requirements and benefits based on your situation and tax debt amount.
How It Works
Use the IRS's Online Payment Agreement tool to digitally submit your installment agreement request. It allows you to set your monthly payment amount and payment date.
Qualifications
You are eligible if you owe $50,000 or less and have filed all required tax returns. For businesses, the limit is $25,000.
Benefits of Applying Online
Step-by-Step Mailing Instructions
Where to Send
Mail the form to the IRS address listed in the instructions based on your location and type of tax.
IRS Phone Numbers
When to Choose This Option
Use this method if you need help with a defaulted agreement, require additional information, or cannot access online services.
To apply for an IRS installment agreement, you may need to submit one or both of the following forms, depending on your tax debt amount and financial circumstances.
Providing the correct documents ensures your installment agreement request is complete and increases your chances of approval.
Form 9465 is the standard document for requesting a monthly installment plan when not formally applying online. It outlines your monthly payment amount, preferred due date, and basic personal and financial information.
You should submit Form 9465 if:
The form is required for individuals and businesses seeking to resolve unpaid taxes through a written payment agreement.
Form 433-F is used to verify your financial condition when requesting a more flexible installment payment agreement or if your balance exceeds $50,000.
You must include this form if:
The form asks for details about your account balances, federal adjusted gross income, expenses, assets, and debts. Submitting accurate, detailed information helps the IRS determine eligibility for your specific payment plan.
Setup Fees and Costs (2024 Update)
When you request an IRS installment agreement, the agency may charge a setup fee depending on your application method and how you plan to make your monthly payments. These costs apply to both individuals and businesses with unpaid taxes.
You may qualify as a low-income taxpayer if your federal adjusted gross income is at or below 250% of the federal poverty level. Benefits include:
The IRS offers special relief for low-income taxpayers who cannot pay their full tax liability upfront.
These benefits help reduce the fees associated with setting up an installment agreement, making it easier for qualifying individuals to manage their tax debt through an affordable payment plan.
If you qualify as a low-income taxpayer, you may be eligible for the following benefits:
The IRS defines a low-income taxpayer as someone whose federal adjusted gross income is at or below 250% of the federal poverty level. This threshold is adjusted annually based on household size and income.
To qualify, you must provide additional information about your income and household details when submitting your installment agreement request. Occasionally, a Collection Information Statement may be required to verify eligibility.
Understanding how IRS installment agreements work in real situations can help you better prepare your payment plan request. The following examples show how different taxpayers can resolve tax debt based on their financial circumstances and eligibility.
A public school teacher filed a tax return and discovered an $8,000 balance due. The taxpayer couldn't pay the full amount by the due date but could pay $300 monthly.
Because the liability was under $10,000, the taxpayer qualified for a guaranteed installment agreement. The request was submitted online using Form 9465: Installment Agreement Request, with payments set up through direct debit from a savings account.
Example 2: $35,000 Small Business Tax Debt
A small business owner with a recently closed business owed $35,000 in taxes and penalties. To prevent collection actions, the taxpayer arranged to pay $600 per month.
The taxpayer qualified for a streamlined installment agreement and completed the request online, authorizing direct debit payments from a financial institution.
Once your installment agreement is approved, proper management is essential to avoid default and ensure continued compliance with IRS requirements. A well-managed payment plan helps you control your tax debt and prevents additional collection actions.
Timely monthly payments are the foundation of any successful installment agreement. Missing even one due date may trigger a default, leading the IRS to reinstate penalties, file a lien, or pursue further collection action. To stay on track, make sure your monthly payment amount is realistic based on your financial condition.
To avoid problems:
Setting up a direct debit from your savings account or another financial institution is highly recommended. Auto-debit ensures timely payment and reduces the chance of error or late submission. It may qualify you for lower setup fees and easier approval under a streamlined agreement.
If your address, bank account, or phone number changes, update your details with the IRS immediately. Failure to keep your information current may result in missed communications, delayed confirmation letters, or unintended default.
Once your installment agreement is in place, maintaining compliance is critical to avoid default. A defaulted agreement can result in renewed collection actions, additional fees, and the potential loss of your payment plan.
Several actions—or inactions—can cause an installment payment agreement to fall into default:
To keep your installment agreement in good standing:
If you miss a payment, please contact the IRS promptly. Often, the IRS may allow you to reinstate the agreement after reviewing your financial condition. Depending on the situation, you may need to submit a new installment agreement request or Collection Information Statement.
The IRS evaluates your income, essential expenses, and overall financial condition to determine an affordable monthly payment. If your balance due is under $50,000 and all required tax returns are filed, you may qualify for a streamlined installment payment agreement. Most plans require full repayment within 72 months.
You can apply for a payment plan that extends up to 72 months, depending on how much you owe and the time remaining in the IRS's collection window. Some installment agreements last until the federal tax collection statute expires.
If you're financially unable to pay your entire tax debt, you may qualify for a partial payment agreement or be marked as temporarily uncollectible. The IRS may request additional information using a Collection Information Statement (Form 433-F) to evaluate your eligibility.
The Online Payment Agreement (OPA) is the IRS’s fastest method for setting up a tax payment plan. It allows taxpayers to apply for an installment agreement online, authorize direct debit payments from a bank account, and often receive immediate approval. This tool eliminates the need to mail paper forms, speeds up processing, and helps you manage your federal tax debt more efficiently without waiting for manual review.
Resolving IRS tax debt begins with filing all required federal tax returns to ensure your account is current. Next, confirm your balance and select an appropriate resolution method, such as an installment agreement or Offer in Compromise. Submit all required forms and supporting documentation, and make timely monthly payments to avoid default. Staying compliant with current taxes prevents additional penalties and ensures your resolution remains in excellent standing.
Schedule your free, confidential tax relief review today.
Copyright © 2025 Get Tax Relief Now
