IRS payment plans explained: You must manage tax debt in 2025

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For millions of Americans who owe taxes but can’t pay in full, the IRS offers structured payment plans that can provide financial relief and help avoid penalties, interest, and aggressive collection actions. Understanding these options is key to staying compliant while managing your tax debt responsibly.

What is an IRS payment plan?

An IRS payment plan, formally called an Installment Agreement, allows taxpayers to pay off their federal tax debt over time through scheduled payments. The program is available to both individuals and businesses under certain eligibility rules. Taxpayers can avoid interest compounding and potential IRS enforcement actions by entering a valid plan.

Key benefits of entering an IRS payment plan

Stops enforcement actions: Once approved, most levies and liens are paused.
Reduces financial stress: Payments are broken down into manageable monthly installments.
Avoids compounding fees: While interest continues, timely payments reduce additional penalties.
Maintains compliance: Keeps you in good standing with the IRS and helps protect future refunds and credit.

Types of IRS payment plans

Short-term payment plans

Who qualifies: Individuals who owe less than $100,000 in total (tax, penalties, and interest).
Term: Pay in full within 180 days.
Fees: No setup fee, but interest and late payment penalties still apply.

Long-term payment plans (Installment Agreements)

Who qualifies:
- Individuals owing $50,000 or less in total debt.
- Businesses owing $25,000 or less.
Term: Typically up to 72 months for individuals; 24 months for businesses.
Fees:
- Direct Debit: $31 (waived for low-income individuals).
- Other methods: $130 by phone/mail; $107 online (non-DDIA).
- Reinstatement fee if plan goes into default.

How to apply for an IRS payment plan

Online Application (most convenient)

Visit IRS.gov/payments and use the Online Payment Agreement (OPA) tool. Requires identity verification and account information. Instant notification of approval in most cases.

By Mail or Phone

Complete Form 9465, Installment Agreement Request. Mail the form to the address on your IRS notice or call 800-829-1040 (individuals) or 800-829-4933 (businesses).

Fee waivers for low-income taxpayers

Taxpayers with adjusted gross incomes at or below 250% of the federal poverty level may qualify for:

Fee waivers when setting up a Direct Debit Installment Agreement (DDIA).
Reimbursement of user fees if unable to set up DDIA but successfully complete the plan.

To apply, submit Form 13844 within 30 days of receiving your installment agreement approval letter.

Managing your payment plan

Once approved, taxpayers can manage their plan through the IRS Online Account:

View and revise payment details (amounts, dates, bank info).
Convert to a DDIA.
Reinstate after default (reinstatement fee applies).
Check current balances and payment history.

Avoiding plan default

To remain in good standing and avoid enforcement actions:

Pay on time: Always submit at least the minimum monthly amount by the due date.
Stay compliant: File all future tax returns and pay any new taxes on time.
Maintain contact: Update your mailing address using Form 8822 if you move.
Understand consequences: A defaulted plan may result in liens, levies, and loss of payment options.

Who doesn’t qualify online?

You must apply by phone or mail if:

You owe more than the thresholds listed above.
You have unfiled tax returns.
You are a business owing over $25,000.
Your payment plan has defaulted multiple times.

What happens if my plan is rejected?

If your request is denied or terminated:

The IRS must wait 30 days before resuming collection.
You can appeal a rejection or termination.
Collections are suspended while appeals are under review.

Final thoughts: Taking action early helps

Entering into a payment plan with the IRS is often the most effective and least painful way to resolve unpaid tax debt. Acting early not only limits financial damage but also opens the door to easier online management and potential fee reductions.