IRS Installment Agreement: How to Set Up a Monthly Payment Plan with the IRS

An IRS Installment Agreement (IA) is a payment plan that lets you pay your tax debt in monthly installments rather than a lump sum. It's the most common IRS resolution option — used by millions of taxpayers every year.

Once an installment agreement is in place, the IRS suspends enforced collection actions like bank levies and wage garnishments, as long as you stay current on your payments and continue filing returns on time.

Important: An installment agreement does not stop penalties and interest from accruing. However, the failure-to-pay penalty is reduced from 0.5% to 0.25% per month while an agreement is active.

1. Guaranteed Installment Agreement Available if you owe $10,000 or less. The IRS must accept this agreement — no financial disclosure required. You have up to 36 months to pay.

2. Streamlined Installment Agreement Available if you owe $50,000 or less. No financial disclosure required. You have up to 72 months to pay. This is the most common type and can be set up entirely online.

3. Non-Streamlined Installment Agreement Required if you owe more than $50,000. You must submit Form 433-A (financial disclosure) and negotiate payment terms with the IRS.

4. Partial Payment Installment Agreement (PPIA) If you can't afford to pay the full balance before the collection statute expires, the IRS may accept lower monthly payments.

Online Application (Streamlined — under $50,000): Go to IRS.gov/OPA (Online Payment Agreement). Approval is immediate and you can choose your payment date and method.

By Mail — Form 9465: Download Form 9465 (Installment Agreement Request) from IRS.gov. Fill in your proposed monthly payment amount and mail it. The IRS typically responds within 30 days.

For Balances Over $50,000: You must also submit Form 433-A (Collection Information Statement). The IRS will calculate your Disposable Monthly Income and set your payment accordingly.

For streamlined agreements (under $50,000), your minimum monthly payment is:

Total Balance ÷ 72 months = Minimum Monthly Payment

Example: $36,000 balance ÷ 72 = $500/month minimum

For non-streamlined agreements, the IRS calculates your Disposable Monthly Income (DMI):

DMI = Gross Monthly Income − IRS-Allowed Monthly Expenses

The IRS uses its National and Local Standards for allowable expenses — not your actual expenses.

Setting up an installment agreement involves a one-time setup fee:

• Online Direct Debit: $31 • Online (non-direct debit): $130 • By phone, mail, or in-person: $225 • Low-income applicants: Fee may be waived or reduced

In addition to the setup fee, interest continues to accrue at the federal short-term rate plus 3% (currently around 8% annually). The failure-to-pay penalty drops from 0.5% to 0.25% per month while the agreement is active.

To minimize total cost, pay as much as you can each month above the minimum — every extra dollar reduces the interest that accrues.

Once your installment agreement is in place, you must:

• Make every monthly payment on time • File all future tax returns on time • Pay any new tax liabilities in full when due • Notify the IRS if your financial situation changes significantly

If you miss a payment or fail to file a return, the IRS can default your agreement and resume collection actions immediately. If you're struggling to make payments, contact the IRS before missing a payment — they can often modify the agreement.