IRS payment plans
An agreement with the IRS to pay federal tax you owe over time instead of all at once. It eases cash flow, but interest and penalties keep growing until the bill is paid.
- No security
How it works
If your business cannot pay a federal tax bill in full, you can ask the IRS for a payment plan (an installment agreement). It brings in no new money: it spreads a debt you already owe.
- Short-term plan: pay in full within 180 days. No setup fee.
- Long-term plan: pay monthly. Setup fees as of October 2026: $29 online or $107 by phone, mail or in person with automatic payments from your bank account (direct debit), or $69 online or $178 otherwise without direct debit. Low-income individuals pay less or nothing.
- Simple Payment Plans: no financial statement, lien decision or trust fund recovery decision is needed. Businesses qualify if they owe $50,000 or less in assessed tax, penalties and interest, or $25,000 or less if the debt includes trust fund taxes (payroll taxes withheld from employees). Most taxpayers can take up to 10 years to pay.
You must have filed all required returns. Businesses apply by calling the number on their notice or the IRS business line, or at a Taxpayer Assistance Center. A sole proprietor applies as an individual, which can be done online.
What it costs: interest keeps adding up, compounded daily, at the federal short-term rate plus 3 percentage points (7% a year for October to December 2026). The failure-to-pay penalty also continues: 0.5% of the unpaid tax for each month or part of a month, up to 25%. For individuals who filed on time, it falls to 0.25% a month while an approved plan is in place.
Payroll taxes: taxes withheld from employees' pay are held in trust for the government. If a business does not pay them, the IRS can make the people responsible for paying them, such as owners and officers, personally liable for the trust fund recovery penalty, even while the business keeps trading.
While a plan request is pending or in place, the IRS generally cannot levy (seize) your property. Not paying tax on time can lead to a federal tax lien.
Upsides and downsides
Upsides
- Spreads a tax bill you cannot pay at once
- The IRS generally cannot levy while a plan is pending or in place
- Simple Payment Plans need no financial statement for smaller debts
Downsides
- Not new money; it only delays a payment you owe
- Interest and penalties keep growing until the bill is paid
- Missing payments or new tax can end the plan
Risks
- If the plan ends, the IRS can resume collection, including liens and levies
- Unpaid payroll taxes can make owners and officers personally liable
- Penalties and interest can make a long plan cost much more than the original bill
What it costs
- How it is priced
- Interest at the federal short-term rate plus 3 percentage points, compounded daily, plus the failure-to-pay penalty and a setup fee
- Costs that are easy to miss
- A setup fee of up to $178 for a long-term plan
- The failure-to-pay penalty of 0.5% a month continues, up to 25% of the unpaid tax
- Interest is also charged on penalties
- Card payment processing fees, if you pay by card
The tax you owe. Simple Payment Plans cover business debts of up to $50,000 ($25,000 with trust fund taxes).
Does it fit?
Could fit when
- Your business owes federal tax it cannot pay in full now
Unlikely to fit when
- Your business owes no federal tax
- You need money for growth or investment, which a payment plan does not provide
- You could pay in full now, or within 180 days without a long-term plan
Who can use it
- Business types: Sole proprietorship, Partnership, LLC, S corporation, C corporation, Benefit corporation, Cooperative, Nonprofit
- You owe federal tax and have filed all required returns
- You can keep up the monthly payments and stay current with new tax
Am I ready?
What a provider is likely to ask for. Tick what you have. Your ticks stay in this browser and nothing is stored. Checklist for all own cash and no-cost
0%
0 of 3 ticked
- All returns filed
- Amount owed
- An affordable monthly payment
Regulation and protections
Regulators: Internal Revenue Service (IRS).
Who runs it: Federal program.
Set by federal tax law and IRS rules. While a payment plan request is pending or in place, the IRS is generally barred from levying. If the IRS rejects or ends a plan, you can appeal.
Types of provider: The IRS (by phone, mail, online or at a Taxpayer Assistance Center).
Also consider
What has changed
No changes since this page was published. It was last checked against its sources on October 17, 2026.
Sources
- IRS: Payment plans (installment agreements), updated March 3, 2026 · checked October 17, 2026
- IRS: Simple Payment Plans for individuals and businesses · checked October 17, 2026
- IRS: Failure to pay penalty · checked October 17, 2026
- IRS: Quarterly interest rates (2026) · checked October 17, 2026
- IRS: Employment taxes and the trust fund recovery penalty (TFRP) · checked October 17, 2026
Something wrong or out of date?
Every fact here comes from a source, and rules and limits change. Email what looks wrong to data@fundladder.uk and, if you can, where you saw the right information. We use your email only to check the correction and reply. Privacy