First: file on time, even if you cannot pay
Not being able to pay is a problem you can solve. Not filing makes it much worse: the failure-to-file penalty is 5% of the unpaid tax per month, ten times the late-payment penalty. So file your return (or get an extension) by April 15, 2027, and pay as much as you can that day. Penalties and interest only apply to what is left unpaid.
Then choose how to pay the rest.
The two kinds of IRS payment plan
| Short-term plan | Long-term plan (installment agreement) | |
|---|---|---|
| Time to pay | Up to 180 days | Monthly payments |
| Apply online if you owe | Less than $100,000 | $50,000 or less |
| Setup fee | $0 | From $29 (see below) |
| Interest and penalties | Keep adding up until you pay | Keep adding up until you pay |
The amounts are the combined tax, penalties and interest you owe. You also need to have filed all required returns. If you owe more than the online limits, you can still ask for a plan by phone, by mail or in person.
If you owe $10,000 or less and have a clean filing and payment history, the IRS generally has to accept a long-term plan (a “guaranteed installment agreement”).
Setup fees for a long-term plan
| How you pay each month | Online | By phone, mail or in person |
|---|---|---|
| Direct debit from your bank account | $29 | $107 |
| Other ways (Direct Pay, check, card) | $69 | $178 |
Low-income taxpayers (adjusted gross income at or below 250% of the federal poverty level) pay no setup fee with direct debit. Without direct debit, the fee is $43, and it may be reimbursed when you finish the plan.
The cheapest option is almost always the same: apply online and pay by direct debit. Direct debit also means you never miss a payment by accident.
How to apply online
- Sign in to your IRS Online Account. You will need to verify your identity with a photo ID if you have not done it before.
- Enter your balance (or the balance due shown on the return you just filed).
- Choose short-term or long-term and, for a long-term plan, a monthly amount and payment day. If the amount is too low, the tool asks you to raise it.
- For direct debit, enter your bank routing and account numbers.
You find out right away whether your plan is approved.
What a payment plan really costs: an example
A freelancer files on time on April 15, 2027 but still owes $6,000. Compare two ways of paying it off over a year:
| Payment plan: 12 monthly payments | No plan: everything paid a year late | |
|---|---|---|
| Monthly payment | $527.06 | – |
| Late-payment penalty | $93.04 (0.25% a month on what is left) | $360.00 (0.5% a month on all of it) |
| Interest (7% a year) | $231.68 | $435.01 |
| Setup fee (online, direct debit) | $29 | – |
| Total extra cost | $353.72 | $795.01 |
The plan costs less for two reasons: the penalty rate is halved while the plan is in effect, and each payment shrinks the balance that penalty and interest are charged on. The example assumes the interest rate stays the same; the IRS resets it every quarter.
Keeping your plan in good standing
- Make every payment on time. Direct debit makes this automatic.
- File all future returns on time and pay new taxes in full. For the self-employed, that includes your quarterly estimated payments. Our quarterly estimated tax calculator tells you how much.
- Contact the IRS before you miss a payment if your situation changes. You can change an existing plan online.
- Pay extra when you can. There is no penalty for paying off early.
If a plan goes into default, the IRS can end it and move on to collection, and there may be a reinstatement fee. Unpaid taxes can also lead to a notice of federal tax lien.
If a payment plan is not enough
- Offer in compromise. Settles your debt for less than you owe if you cannot pay it in full. You must have filed all returns and made all required estimated payments; the IRS has an online pre-qualifier tool to check whether you are likely to qualify. There is an application fee, waived for low-income applicants.
- Temporarily delay collection. If paying would leave you unable to cover basic living expenses, the IRS can mark your account “currently not collectible”. The debt does not go away, and interest and penalties keep growing.
- Borrow elsewhere. A loan or a credit card may cost less than IRS interest and penalties. Compare the rates first.
So it does not happen again
A tax bill you cannot pay usually means too little was set aside during the year. Two habits fix it:
- Set aside a fixed share of every payment you receive. Our guide on how much to set aside for taxes shows the percentage for your income.
- Pay quarterly. It spreads the bill over the year and avoids the estimated tax penalty.
To see what you will owe for 2026 before it is due, use our 1099 tax calculator.