The plan types and their limits
The IRS uses "payment plan" and "installment agreement" for the same thing. The types below differ in how much you can owe and whether the IRS looks at your finances.
| Plan | Balance limit | Time to pay | Financial statement |
|---|---|---|---|
| Short-term payment plan | Less than $100,000 in combined tax, penalties and interest | 180 days or less | No |
| Simple Payment Plan, individuals | $50,000 or less in assessed tax, penalties and interest | By the end of the collection period; the IRS says most taxpayers have up to 10 years | No |
| Simple Payment Plan, business without trust fund taxes | $50,000 or less | By the end of the collection period | No |
| Simple Payment Plan, business with trust fund taxes | $25,000 or less ($50,000 for an out-of-business sole proprietorship) | By the end of the collection period | No |
| Guaranteed installment agreement | Income tax of $10,000 or less, not counting penalties and interest | Within 3 years | No |
| Plan above the Simple Payment Plan limit | No limit | Negotiated | Generally yes |
| Partial pay installment agreement | No limit | Until the collection period ends | Yes |
The Simple Payment Plan was formerly the streamlined installment agreement. The IRS manual revision of July 21, 2026 removed the old six-year term and the direct debit requirement for balances above $25,000. See the Simple Payment Plan for what changed.
Setup fees for 2026
The IRS charges a one-time user fee when a long-term plan is approved. It last updated the amounts on March 3, 2026. The fee depends on how you apply and how you pay.
| Plan and payment method | Apply online | Apply by phone, mail or in person | Low income |
|---|---|---|---|
| Pay in full today | $0 | $0 | $0 |
| Short-term plan (180 days or less) | $0 (individuals only) | $0 | $0 |
| Long-term plan with direct debit | $29 | $107 | Waived |
| Long-term plan, other payment methods | $69 | $178 | $43, which may be reimbursed |
| Revise an existing plan | $6 | $89 | $6 online or $43 otherwise, which may be reimbursed |
| Change an existing direct debit agreement | $0 | $0 | $0 |
Who counts as low income
The waiver and reimbursement apply to individuals whose adjusted gross income, for the most recent year available, is at or below 250% of the federal poverty level. If you agree to direct debit, the setup fee is waived. If you cannot use direct debit, you pay $43 and it is reimbursed when you complete the plan.
The IRS system normally identifies low-income status on its own. If it does not and you believe you qualify, Form 13844 asks the IRS to reconsider. It must be sent within 30 days of the date on your acceptance letter.
What each way of paying costs
- Direct debit from a checking account: no per-payment charge, the lowest setup fee, and the method required if you later want a lien notice withdrawn.
- IRS Direct Pay from a checking or savings account: no per-payment charge, but you start each payment yourself.
- Electronic Federal Tax Payment System (EFTPS): no per-payment charge; enrollment is required.
- Check or money order: no IRS charge, but mailing time is at your risk.
- Debit card, credit card or digital wallet: the payment processor charges a fee on every payment.
The penalty rate drops, the interest does not
While a payment plan is in effect, the failure-to-pay penalty falls from 0.5% to 0.25% a month for individuals who filed the return by its due date. Interest is unchanged: the federal short-term rate plus 3 percentage points, set each quarter and compounded daily. The rate is 7% for the fourth quarter of 2026.
This is why the length of the plan is the biggest driver of cost. The setup fee is paid once. Interest and the reduced penalty are charged every month the balance exists.
Illustrative example. On a $20,000 balance, 7% interest alone is roughly $115 in the first month, and the 0.25% penalty adds about $50 while penalty is still accruing. A $300 monthly payment clears the balance far more slowly, and at a much higher total cost, than a $600 payment. Run the numbers for your own balance before choosing the smallest payment the IRS will accept.
How to apply for each type
- 1.Individuals who owe $50,000 or less (long-term) or less than $100,000 (short-term) can apply in their IRS online account and get an immediate answer.
- 2.Sole proprietors and independent contractors apply as individuals.
- 3.Businesses cannot apply online. Call the number on the notice or 800-829-4933, 7 a.m. to 7 p.m. local time.
- 4.By mail, use Form 9465. If you cannot afford the minimum payment, the IRS asks for Form 9465 with Form 433-F, or the combined Form 433-H.
Keeping the plan alive
A plan ends early for three reasons: a missed payment, a later return not filed, or a new balance. The third is the most common. Our page on IRS installment agreements explains how defaults happen and how a payment is negotiated when a financial statement is involved, and after your plan is approved covers what to do each year.
Where we come in
If you owe $50,000 or less and can afford the payment, you can usually set up the plan yourself online for the setup fee alone. When the balance is larger or the payment is out of reach, our work is the record side: reading the transcripts for every open year, working out the collection statute date for each assessment, and preparing the Collection Information Statement with its documents so the payment proposed is one the figures support. We give you a scope and a price in writing before anything starts.
Figures on this page were checked against the IRS and Massachusetts sources listed alongside on October 1, 2026. They change — confirm the current amount before relying on one.
General information for owner-led businesses, not advice for your specific situation. Tax and accounting rules change, and how they apply depends on facts particular to your business. Talk to us — or to another qualified professional — before acting on anything here.
