Can You Make Payments On Taxes?

Yes, you can make monthly payments on taxes through an IRS Installment Agreement (IA). The IRS offers payment plans ranging from 120 days (no fees) to 72 months, depending on how much you owe and your financial situation.

IRS Payment Plan Options & Costs

Short-Term Payment Plan (120 days or less)

Cost: $0 setup fee
Best for: Taxpayers who can pay quickly but need a few extra months

Long-Term Installment Agreements

Direct debit: $52 setup fee
Standard mail/payroll deduction: $105 setup fee
Low-income taxpayers: $43 reduced fee

Qualification Requirements by Amount Owed

Under $50,000 Owed

Streamlined approval: Up to 72-month payment plan
Documentation: Minimal financial information required
Processing: Faster approval process

Over $50,000 Owed

Additional requirements: Complete Form 433-A or Form 433-F
Financial disclosure: Must provide detailed asset, income, and expense information
Potential asset liquidation: May be required to sell assets to reduce balance

Essential Eligibility Requirements

Must be current on:

All tax return filings
Quarterly estimated payments (self-employed)
Payroll deposits and Forms 940/941 (employers)

Cannot have: Prior installment agreement defaults

How Monthly Payment Amounts Are Determined

The IRS calculates your payment based on:

Total income minus allowable living expenses
IRS-approved expense categories (housing, transportation, food, healthcare)
Non-allowable expenses (private school, high credit card payments, donations)

Pro tip: Making voluntary payments before approval demonstrates good faith and reduces total debt.

Common Reasons for Denial

Excessive or unnecessary living expenses
Incomplete or false financial information
Hidden income or assets
Inability to borrow against asset equity
Previous installment agreement defaults

Bottom line: IRS payment plans are available, but require complete financial transparency and realistic payment proposals based on your true ability to pay.

Fees For Installment Plans

If you can pay off your tax debts within 120 days, you will not have to pay any additional fees. If you need longer to pay back your tax debt you may be required to pay a direct debit fee of $52.

You can also set up a standard mail-in or payroll deduction plan for $105.

If you are a low-income taxpayer, you may be able to qualify for a lower fee of $43.

Outstanding Balance Amounts

Depending on the amount you owe to the IRS and your ability to pay, you may or may not qualify for an installment plan.

Thanks to the Fresh Start program, it is now easier to reach agreements with the IRS concerning outstanding tax debts.

You can now obtain a streamlined installment plan for 72 months if you owe less than $50,000. You do not have to provide any additional financial information.

This was increased from the previous IRS streamlined installment plan for taxpayers owing less than $25,000 over 60 months.

If you owe more than $50,000, you will have to provide additional financial information. You will have to do additional negotiation to obtain an installment plan.

If this is the case, the IRS will perform a thorough investigation of your finances and ability to pay. They will require you to provide additional information on Form 433-A or Form 433-F. This will include detailed information about all of your investments, assets, bank accounts, and income.

You may need to sell some assets in order to pay down your outstanding balance.

Be Current on Your Tax Returns

You will not be able to establish an agreement with the IRS unless all of your tax returns are filed and current. As a self-employed individual, you must make quarterly estimates on your current year taxes.

You must also be current on payroll deposits and your Form 940 and 941 if you have employees.

Agreeing on a Monthly Payment

Your request for a non-streamlined IA will begin with providing your financial information to an IRS Collection’s Officer. He or she will look at and review the information on Form 433-A or Form 433-F.

The IRS Collection’s Officer will determine the amount that you will be required to pay each month on your installment agreement based on the information you provide.

However, you can influence the decision. You may wish to propose a monthly payment amount when you submit the Form 433-A. There are also certain expenses that the IRS allows you to have that may reduce the amount of your monthly installment agreement payment.

Make voluntary payments. If you voluntarily make payments before your installment agreement is approved, you may be more likely to reach an agreement. This will also reduce your total tax debt and the amount of interest and penalties that are accruing.

This also demonstrates good faith.

It may take several months for you to receive notice from the IRS regarding this agreement.

What If I Am Not Approved?

There is a chance that your request will be denied. This could be for several reasons.

The IRS may determine that some of your living expenses are not necessary. This could be private school tuition, high credit card payments, or donations. The IRS does not consider these payments when determining your ability to pay.

Expect the IRS to push back against any “extravagant” expenses.

The IRS may also find that you have provided incomplete or untruthful information. This could be if you are hiding income or property. Don’t expect to get away with this.

The IRS may also require you to provide additional information to show that you are not able to borrow against equity in your assets.

The IRS may also deny your request if you have defaulted on a previous IAs.

If you are initially denied, you can continue to negotiate. You may also need to request to speak with a manager or file an appeal on the denial.

When the IRS Revokes an Installment Agreement

If you are approved for an IA, you are bound by the terms outlined by the IRS. If you fail to comply, your IA may be revoked.

You must continue to file your tax returns and pay each year’s tax balances.

The IRS must receive each monthly payment by the payment deadline

The IRS may review your financial situation every year or two and ask you to fill out a new Form 433-A. If your financial situation changes significantly your IA may be revoked.

The IRS may revoke your IA if they find out you provided inaccurate or incomplete information on Form 433-A.

Paying Your Taxes on Time

In order to avoid this struggle, you should try to pay your taxes on time. This will save you from accruing additional interest.

It is possible to pay an IA over several years and owe more than you originally did. This is because of the high interest rates and penalties on the unpaid tax balances.

Even if you cannot pay your balance in full, you should still file your return on time. This will save you penalties for filing late.