Quick answer
If you owe taxes you can’t pay in full, file your return on time anyway and set up an IRS payment plan. If you can pay within 180 days, a short-term plan is free. If you need longer and owe $50,000 or less, you can set up a monthly installment agreement online for $29 with automatic bank payments (or $69 otherwise). Interest (7% a year in late 2026) and a reduced late-payment penalty keep accruing until you’ve paid everything.
First steps when you can’t pay
- File on time, or request an extension. The failure-to-file penalty (5% per month) is ten times the failure-to-pay penalty (0.5% per month). Never skip filing because you can’t pay.
- Pay as much as you can now. Every dollar you pay stops interest and penalties on that dollar.
- Choose a payment plan for the rest.
IRS payment plan options and 2026 fees
| Plan | Who qualifies (online) | Time to pay | Setup fee online | Setup fee by phone or mail |
|---|---|---|---|---|
| Short-term payment plan | Individuals owing less than $100,000 (tax, penalties and interest) | Up to 180 days | $0 | $0 |
| Long-term plan with direct debit | Individuals owing $50,000 or less, all returns filed | Monthly payments | $29 | $107 |
| Long-term plan, other payment methods | Same | Monthly payments | $69 | $178 |
- Low-income taxpayers (at or below 250% of the federal poverty level) can have the direct debit fee waived, or get the fee reimbursed when they finish the plan.
- Changing a plan online costs $6 ($89 by phone or mail); changes to direct debit plans are free.
- Owe more than $50,000? You can still get an installment agreement, but you’ll apply by phone or mail and may need to share financial information.
How to apply online
- File your return (plans require all returns to be filed).
- Go to IRS.gov/paymentplan and choose «Apply/Revise as individual».
- Sign in to your IRS account (ID.me identity verification).
- Pick the plan type: short-term (up to 180 days) or long-term (monthly).
- Choose the payment method. Direct debit from your bank account has the lowest fee and the IRS can’t miss a payment.
- Pick your monthly amount and due date. Pay more than the minimum if you can; interest runs on the balance.
- Submit. You’ll get immediate notification of approval.
What a payment plan really costs
While you’re on a plan, the IRS keeps charging:
- Interest on the unpaid balance (7% a year, compounded daily, in late 2026; it changes quarterly).
- The failure-to-pay penalty, reduced from 0.5% to 0.25% per month while an installment agreement is in effect, if you filed on time.
Example: you owe $12,000 in April 2027 and set up a 24-month direct debit plan. With interest and the reduced penalty (roughly 10% a year combined), your payment is about $554 a month and the total cost is about $1,300 plus the $29 setup fee. Paying off faster, or with savings or a lower-rate loan, reduces that.
Other options if a payment plan isn’t enough
- Currently Not Collectible status: if paying anything would prevent you from covering basic living expenses, the IRS may pause collection (interest still accrues).
- Offer in Compromise: settling for less than you owe, only for people who truly can’t pay the full amount. Use the IRS pre-qualifier tool and beware of companies promising «pennies on the dollar».
- Penalty relief: if you have a good compliance history, you may qualify for first-time abatement of failure-to-file or failure-to-pay penalties (not the estimated tax penalty).
How to avoid owing again
- Set aside 25-30% of every payment in a separate account. See How Much to Set Aside for Taxes.
- Pay quarterly estimated taxes. See Quarterly Estimated Taxes.
- Use the safe harbor to avoid penalties. See The Safe Harbor Rule.
- Important: while on a plan, stay current on new estimated payments and future returns, or the IRS can cancel the agreement.
Frequently asked questions
Will a payment plan hurt my credit score?
IRS payment plans aren’t reported to credit bureaus. A federal tax lien, which the IRS may file on larger unpaid balances, is a separate issue.
Can I get a payment plan if I still owe for a previous year?
Yes. You can combine balances from several years into one plan if the total is within the limits.
Can I pay off my plan early?
Yes, at any time and without penalty. It saves interest.
What happens if I miss a payment?
Contact the IRS right away. Missing payments or failing to file new returns can default the agreement.
This article is general information, not tax advice. If you owe a large amount, consider speaking with a CPA, Enrolled Agent or tax attorney.
Sources
- Payment plans; installment agreements (IRS): plan types, eligibility limits, 2026 setup and revision fees, low-income waiver.
- Interest rates remain the same for the fourth quarter of 2026 (IRS): 7% interest rate.
The reduced 0.25% failure-to-pay rate during installment agreements, Currently Not Collectible status, Offer in Compromise and first-time abatement come from IRS guidance. The example is a FreelancerTaxHQ estimate.