How Much Does the IRS Charge for a Payment Plan

March, 06 2025 by Anne Davis, EA and Jean Lee Scherkey, EA

Not being able to pay your income tax bill in full by the due date of your tax return can create tremendous stress in your life. Fortunately, the IRS offers options to help taxpayers meet their tax obligations. One option is an IRS payment plan agreement. This blog will discuss the various payment plan agreements offered by the IRS to individual taxpayers and what it costs to set up each plan. The application fees vary depending on how each plan is structured.
 

So, what is an IRS payment plan agreement?

Before we get into dollars and cents, we should lay a little tax foundation. What exactly is an IRS payment plan agreement? Simply put, it is a plan that allows you to pay your taxes within an extended timeframe. The benefit of requesting a payment plan is that it will generally prohibit the IRS from taking much-feared levy action while the request is being processed. Once your payment plan request is approved, the IRS generally will not issue a Notice of Intent to Levy if the taxpayer makes their agreed-upon payments in a timely manner. For those who are not familiar, a levy is when the IRS seizes your property to satisfy a tax debt. It is part of the IRS’s collection process, and one of a series of steps that the IRS can take to satisfy a tax debt. The IRS collection process begins after the IRS issues their final bill reminder and the taxpayer does not make arrangements to pay the balance due.

To qualify for a payment plan, typically, all your delinquent tax returns must be filed. Additionally, you may need to create an ID.me account if you establish an online payment agreement. When setting up an ID.me account, you will be asked to provide a photo ID. To get the facts on the information and services available to individual taxpayers with an online account, please click here.

Let’s get down to the nitty gritty. The IRS has different types of payment plans, depending on the amount of tax owed and the length of time needed to pay off the tax bill.

 

Short-Term Payment Plan

Let’s first discuss the IRS’ short-term payment plan agreement. To qualify for the short-term payment plan agreement, the total tax balance (which consists of the combined tax, penalties, and interest owed) must be less than $100,000 and must be paid off in 180 days or less. Short-term payment plans are good for taxpayers who have the resources to pay the entire balance due but need extra time to get the payment together. For example, if a taxpayer is assessed a balance due of $3,000 and knows they will receive a bonus at work in three months that will cover the entire amount due, the taxpayer could request a short-term payment plan. This would save taxpayers long-term payment plan setup fees and the accrual of additional interest that may come with paying the balance due over a longer period. This plan can be set up using the IRS’ Online Payment Agreement (OPA) application or by phone: 800-829-1040. If you are able to sign up for this plan, you will pay $0 in fees. However, penalties and interest will continue to accrue until the balance is paid in full.
 

Long-Term Payment Plans (Also Known as Installment Agreements)

Before discussing fees, it is essential to be familiar with the different payment plans so you can choose the one that is best for your situation. Below are some IRS terms to be aware of as you review the various installment agreements.

Collection Statute Expiration Date
Generally, the IRS has ten years from the date the tax liability is assessed to collect the tax due. This is known as the Collection Statute Expiration Date, or CSED. Keep in mind that the time running on the statute can be paused for several reasons. For instance, the IRS’ collection period is suspended while the request for an installment agreement is being processed. Generally, if the CSED is less than 6 years away, the monthly payment amount must be enough to pay the entire balance due by the CSED. An exception is discussed below under Partial Payment Installment Agreements.

Notice of Federal Tax Lien
Generally, the IRS has the authority to file a Notice of Federal Tax Lien when a taxpayer does not pay their tax liability on time. Under many circumstances, the IRS may withdraw a Notice of Federal Tax Lien when a taxpayer enters into an installment agreement if one was already issued. However, there are times when the IRS will file a lien as a condition of the installment agreement, even if a lien has not already been issued. A Notice of Federal Tax Lien is a public document filed by the IRS alerting creditors that the government has a legal right to your property. Since 2018, Notices of Federal Tax Lien are no longer reported on consumer credit reports. For more information on federal tax liens, please review the IRS’ webpage titled “Understanding a federal tax lien.”

IRS Collection Information Statement
For some long-term payment agreements, the IRS will require that the taxpayer provide a completed version of Form 433, Collection Information Statement. Most individual taxpayers who do not own a business or have extensive investments may be asked to complete Form 433-F, Collection Information Statement, which is a simpler version of the form. This form reports taxpayers' income, assets, and liabilities to the IRS. The information provided is used to determine the monthly payment the taxpayer can afford.

So now, let’s discuss the highlights of each long-term payment plan agreement, also known as installment agreements.

 

Guaranteed Installment Agreement

As the name of the plan suggests, the IRS generally automatically approves these plans if the taxpayer meets specific criteria:

• Owes $10,000 or less.
• Agrees to pay the full amount due within three years or by the Collection Statute of Expiration Date, whichever is earlier.
• Has timely filed and paid the tax due on all required income tax returns during the past 5 years.
• Has not entered into an installment agreement during the past 5 years.
• Is financially unable to pay the tax balance in full when due.

Collection Information Statement Required?
Generally, filing a Collection Information Statement is not required.

Is a Notice of Federal Tax Lien Required?
Generally, a Notice of Federal Tax Lien is not required for this plan.

 

Streamlined Installment Agreement (SIA)

• Available to individual taxpayers who owe $50,000 or less. For those who owe over $25,000, but not more than $50,000, a Streamlined Installment Agreement is approved if the taxpayer makes their monthly payments via automatic direct debit or payroll deduction.
• The IRS will allow you up to 72 months (6 years) to pay off your balance due, and the payments must be made monthly. The exception to the 72-month timeframe is if the IRS has less than 6 years to collect the balance due because the collection statute of expiration will expire.

Collection Information Statement Required?
Generally, it is not required.

Is a Notice of Federal Tax Lien Required?
Generally, a Notice of Federal Tax Lien is not required to establish a Streamlined Installment Agreement.

 

Routine/Standard Installment Agreement

• If you don’t meet the requirements of a Guaranteed or Streamlined Installation Agreement, you can apply for a Routine Installment Agreement.
• If your balance is $50,000 or less, you can apply online.

Collection Information Statement Required?
The IRS may require you to complete a Collection Information Statement.

Is a Notice of Federal Tax Lien Required?
The IRS may issue a Notice of Federal Tax Lien determination.

 

Full-Pay Non-Streamlined Installment Agreement

• For balances up to $250,000, generally. This plan is for taxpayers who owe more than $50,000 and request a payment plan.
• Taxpayers have up to the Collection Statute Expiration Date to pay the balance due in full. (Remember, the statute of limitations on IRS collections is generally ten years from the date of assessment.)

Collection Information Statement Required?
Completion of a Collection Information Statement is usually not required. The exception is, if your case has already been assigned to a Revenue Officer, you will be required to provide financial information.

Is a Notice of Federal Tax Lien Required?
A Notice of Federal Tax Lien is usually required.

 

Partial Payment Installment Agreement (PPIA)

• This payment plan is available to taxpayers who cannot pay the full amount of tax owed by the Collection Statute Expiration Date. This plan allows you to pay what you can afford until the statute expires. Once the statute expires, the remaining tax debt ceases to be collectible.
• The IRS will review your financial situation throughout the duration of the payment plan to ensure you are making the appropriate monthly payment given your finances. The review does not automatically mean the IRS will increase your monthly payment. It is possible the IRS may reduce the monthly payment amount or keep it the same.

Collection Information Statement Required?
Usually, the IRS will require you to provide completed financial statements such as Form 433-F, Collection Information Statement or Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, and documentation to support the financial information provided.

Is a Notice of Federal Tax Lien Required?
The IRS will complete a Notice of Federal Tax Lien determination.

 

Long-Term Payment Plan Agreement Fees

Installment agreement fees vary. The IRS has reduced fees for those whose income is below a certain threshold. To be considered low income, a taxpayer’s adjusted gross income for the most recent year must be at or below 250% of the applicable federal poverty level. A low-income taxpayer is either identified by the IRS system and the fees are automatically adjusted, or if a taxpayer believes that they qualify as a low-income taxpayer, they can fill out and mail Form 13844, Application for Reduced User Fee for Installment Agreements. This form should be sent to the IRS within 30 days of the date of their installment agreement acceptance letter.

There are several ways to apply for and pay the scheduled payments, which are listed below, along with their applicable processing fee. The figures below reflect the rate changes that became effective as of July 1, 2024.

Applying Online Through an Online Payment Agreement
Most payment agreements with total balances of $50,000 or less can be set up and revised online through the IRS Online Payment Agreement (OPA). The setup fees depend on how you choose to make your monthly payments.

• If you choose to make your monthly payments through an automatic direct debit from your checking account or via an automatic payroll deduction, there is a $22 setup fee. These plans are also known as Direct Debit Installment Agreements (DDIA).
• If you choose NOT to make your monthly payments via automatic direct debit, the setup fee is $69. Other payment methods include sending a check or money order and paying with a credit or debit card (which has additional fees). Additionally, you can make your payments through the U.S. Treasury’s Electronic Federal Tax Payment System (EFTPS) or through Direct Pay.
• If you need to make changes to your current agreement or need to reinstate one that was canceled due to missed payments, your fee will be $89.
• Low-income taxpayers who pay via automatic direct debit will not incur a setup fee, even if they need to make modifications to their plan.
• Low-income taxpayers who pay by any other method will be charged a setup fee of $43.
• Low-income taxpayers who need to modify or reinstate an agreement online will be charged a $10 fee.

Applying Via Phone, Mail, or In-Person
In addition to applying for an installment agreement online, taxpayers can obtain an agreement by contacting the IRS by phone (800-829-1040), submitting Form 9465, Installment Agreement Request by mail, or visiting your local IRS Taxpayer Assistance Center.
 

• If you choose to make your monthly payments through automatic direct debit from your checking account or via automatic payroll deduction, you will be charged a $107 setup fee.
• If you choose NOT to make your monthly payments via automatic direct debit, the setup fee is $178.
• If you need to make changes to your current agreement or need to reinstate one that was cancelled due to lack of payment, your fee will be $89.
• Low-income taxpayers who pay via automatic direct debit will not incur a setup fee, even if they need to make modifications to their plan.
• Low-income taxpayers who pay by any method other than Direct Debit Installment Agreement will be charged a setup fee of $43.
• The fee to modify or reinstate an installment agreement when you are considered a low-income taxpayer is $43.

Being granted an IRS payment plan is a privilege. Therefore, it is important you take caution to avoid defaulting. Steps that you can take to avoid defaulting include:
 

• Pay the minimum amount due timely.
• File all your tax returns timely and pay the taxes in full. If you cannot pay your taxes in full, contact the IRS to change your existing installment agreement.
• Make all your scheduled payments, even if your refund is applied to your balance due.
• If sending payments by mail, send them to the address listed on your IRS correspondence.
• Contact the IRS if you move by mailing a completed Form 8822, Change of Address.

The unexpected happens all the time. If a situation occurs and you are unable to make your monthly payment, it is crucial to contact the IRS immediately to discuss the matter. Depending on the facts and circumstances of your situation, the IRS may postpone your payment or adjust your monthly payment amount. In some cases, the IRS may discuss other payment alternatives.

You don’t have to be alone when wading through your payment plan options. If you would like to receive professional assistance, please contact our        Tax Debt Relief team at TaxAudit. Our professionals can assist you in taking back control of your finances.