The Internal Revenue Service has expanded eligibility for its IRS online payment plan, allowing more taxpayers to manage unpaid taxes electronically. Starting with the 2025 filing season, the IRS payment plan now covers individuals who owe up to $50,000 in combined tax penalties and interest. The change makes it easier to apply online and establish an installment agreement without needing to mail forms or contact the IRS by phone.
The Internal Revenue Service stated that the updated plan more than doubles the previous $25,000 threshold, enabling millions of individual taxpayers to qualify for simplified arrangements. Under the new rules, taxpayers who owe up to $50,000 in taxes, penalties, and interest can submit a payment agreement through their online account, eliminating the need to mail a Collection Information Statement.
Eligible taxpayers must have filed all required tax returns and be current on their payments. Those who apply online can check their balance, select a term payment plan, and get approval within minutes. The secure system, marked by the locked padlock icon, lets users review their financial condition and adjust their payment amount as needed.
“Funding from the Inflation Reduction Act is helping spur innovation and improvement across the IRS to transform our operations,” said Commissioner Danny Werfel. “By providing digital forms, making payments easier, and reducing paper-based processes, our progress is accelerating to make long-overdue improvements.”
Taxpayers can choose between short-term and long-term payment plans, depending on the amount they owe and their financial institution's preferences. A short-term plan allows up to 180 days to pay the full amount, with no setup fees when established online. A long-term installment agreement spreads monthly payments over several years—up to 10 years in some cases—and carries setup fees ranging from $22 to $178.
Each agreement requires a minimum monthly payment based on the total amount owed. Taxpayers who are financially unable to pay in full may still qualify for reduced fees or longer repayment terms under certain conditions.
The IRS recommends using a direct debit payment plan or IRS Direct Pay to make automatic online payments from a checking or savings account. Automatic payments reduce the risk of default, limit penalties and interest, and prevent more interest from accumulating. Taxpayers can also make manual tax payments online or by mail, but direct debit offers the lowest cost and most reliability.
Those with an existing installment agreement can log into their online account to adjust their payment amount, update their bank details, or request a new plan. Missing a payment or failing to pay by the due date may cause default and trigger additional notices or collection actions.
The IRS stated that the expansion of online payment plans supports its broader modernization goals. With funding from the Inflation Reduction Act, the agency is developing a digital-first system that enables taxpayers to pay, file, and communicate more efficiently.
Before this change, taxpayers who owed more than $25,000 were required to mail financial forms and wait weeks for manual review. Now, most applications are approved instantly, which helps reduce IRS processing times and eliminates the need for paper correspondence.
Tax professionals say the new system improves both compliance and fairness. “Simplifying the installment agreement process helps taxpayers stay on track with their tax payment obligations,” said Lisa Hernandez, an enrolled agent who represents clients before the IRS. “This is a big step toward better accessibility for people who might otherwise fall behind.”
The IRS urges taxpayers to file on time even if they are unable to pay the full amount owed. Failing to file a tax return carries a higher penalty than failing to pay. Once a plan is established and approved, the failure-to-pay penalty rate is cut in half. Interest and penalties still accrue on unpaid taxes until the full amount is paid, but setting up an agreement prevents enforcement actions.
Any tax refund due in a future tax period will be automatically applied to the unpaid balance until the total amount is paid in full. Taxpayers should factor this offset into their payment agreement calculations. Automatic monthly payments from a financial institution remain the best way to stay current and avoid additional penalties.
Taxpayers must make payments on or before the due date to keep their plan in good standing. Missing a payment or failing to maintain direct debit authorization may result in default, which can lead to additional penalties and interest. Individuals experiencing financial hardship can contact the IRS to request modifications to their plan or a temporary delay in collections.
Taxpayers can apply online at any time by visiting the IRS Payment Plan Online page or logging into their IRS Online Account. The application typically takes around 15 minutes, and most requests are automatically approved. Applicants should have their tax return, bank account information, and current income details ready before starting the process.
Once established, taxpayers can review their accounts, track payments, and view their payment history online. The IRS system automatically generates a notice confirming approval, along with the first payment date and payment amount.
Small businesses that owe payroll or income taxes can also use the online system to create installment agreements under similar terms. The IRS encourages all taxpayers—individuals and businesses—to visit the payments page for additional information about setup fees, interest rates, and payment options.
Taxpayers who are unable to apply online can still submit Form 9465 by mail; however, the agency recommends using the online process for faster approval and lower fees.
By William Mc Lee, Editor-in-Chief & Tax Expert—Get Tax Relief Now
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