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IRS Payment Plan Options When You Cannot Pay in Full
If you owe the IRS and cannot pay it all at once, you have options. Which one fits depends on what you owe, what you can afford each month, and whether every required return is filed.
Reviewed by LaToya Clark-Thompson, FounderLast updated
First: file everything
Every IRS payment option requires you to be current on filing. If any required return is missing, that comes first; see back tax filing. It also helps to know exactly what you owe, by year, from your IRS account rather than from the last letter, because penalties and interest keep adding to the balance until it is paid.
The Simple Payment Plan
The Simple Payment Plan is the IRS’s current name for its most straightforward long-term payment plan, and it replaced the old streamlined installment agreement. It is available to individuals and, under the IRS’s updated qualifications, to businesses, as long as the balance is within the limits the IRS sets and all filing and payment requirements are current.
- No collection information statement (financial disclosure) is required
- No lien determination is required to set it up
- The old rule that the balance be paid within a fixed number of months is gone. Most taxpayers can spread payments across the period the IRS has to collect, and a longer plan means more interest
- Individuals can apply in their IRS Online Account; businesses apply by phone or at a Taxpayer Assistance Center
A longer plan means lower monthly payments but more interest and penalties in total, so pay more than the minimum when you can.
Short-term plans and other installment agreements
If you can clear the balance within a short period, a short-term payment plan gives you that time without a monthly installment schedule. Penalties and interest still run until it is paid.
If you owe more than the Simple Payment Plan allows, or cannot afford its minimum payment, other installment agreements are available. These usually require a collection information statement, such as Form 433-F, 433-H or 433-B, showing your income, expenses and assets, and the IRS sets the payment from that information. The IRS may file a lien for larger balances.
Currently not collectible and offers in compromise
If paying anything would leave you unable to meet basic living expenses, the IRS can place your account in currently not collectible status, which temporarily pauses most collection. The debt is not erased, penalties and interest continue, refunds are applied to the balance, a lien may be filed, and the IRS can review your situation later. It usually requires financial information and documents.
An offer in compromise can settle a tax debt for less than the full amount when the IRS agrees you cannot pay it in full through a payment plan or the equity in your assets. The IRS weighs your income, expenses and asset equity. You must have filed all returns, made required estimated payments, and not be in an open bankruptcy. Individuals can now apply online through their IRS Online Account, and the IRS Pre-Qualifier tool is a good first check. Offers are not a fit for most people, and the IRS decides whether to accept one. Our post on the offer in compromise explains more.
How we help
We file any missing returns, pull your account transcripts so you know the real balance by year, and put together the income, expense and asset figures a plan or an offer needs, so you can see which option fits before you commit. For business owners, we also set up the bookkeeping or payroll services that keep new balances from building while the old one is paid down.
Where someone needs to deal with the IRS for you, such as a financial-statement agreement, an offer, or a collection appeal, that is the independent licensed CPA we work with, with our office coordinating. See tax resolution. To start, send your most recent IRS letters through the secure client portal.
Frequently asked questions
What is the IRS Simple Payment Plan?
It is the IRS’s streamlined long-term payment plan for individuals and businesses whose balance is within IRS limits and who are current on filing and payments. It does not require a financial statement, and instead of a fixed number of months, the minimum payment is set so the balance is paid by the end of the IRS collection period. Individuals can apply online.
Do penalties and interest stop when I am on an IRS payment plan?
No. Interest continues on the unpaid balance, and the failure-to-pay penalty generally keeps running, though at a reduced rate for individuals who file on time and are on an installment agreement. Paying more than the minimum shortens the plan and lowers the total. Some penalties may be reduced separately; see IRS penalty relief.
Can a business get an IRS payment plan?
Yes. The IRS updated its Simple Payment Plan qualifications to include business taxpayers within its limits, including those with payroll trust fund taxes. Businesses apply by phone or at a Taxpayer Assistance Center. A business with unpaid payroll taxes should also act quickly because of the personal trust fund recovery penalty.
What happens if I miss a payment on my IRS installment agreement?
The IRS can default the agreement, and collection, including levies, can resume after notice. Not filing or paying a new year’s tax on time can also default it. If you know a payment will be missed, contact the IRS before the due date, because a plan can often be revised.
Am I a good candidate for an offer in compromise?
Usually only if your income, after allowable living expenses, and the equity in what you own could not pay the debt within the collection period. Most people with steady income are better served by a payment plan. The IRS Pre-Qualifier tool gives a preliminary read before you prepare an application, which requires full financial disclosure.
Not the question you had? The full tax FAQ covers more ground, and our client reviews say what the work is actually like.
Related pages
IRS penalty relief
The Automatic Exemption from Penalty, which replaces First-Time Abate, and reasonable cause relief.
Learn moreCP14 notice
The first bill for a balance due. How to check the figure and pay or set up a plan by the date on the notice.
Learn moreCP504 notice
Notice of intent to levy. The IRS can take a state refund and warns about wages and bank accounts next.
Learn moreLetter 3172 (federal tax lien filed)
The IRS filed a public lien for your balance. You have a hearing right with a deadline in the letter.
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