Can you pay your whole tax bill within a few months? Then a short-term plan is the simplest of the IRS payment options. It has no setup fee [2]. If you need years, a monthly payment plan is the normal route.
An offer in compromise settles the debt for less. It is only for people who cannot pay in full, or for whom paying would cause real hardship [3]. The IRS generally turns down offers when a payment plan would work [3].
There is also a fourth choice for hardship: the IRS can pause collection.
Below is how each option works, who qualifies, what it costs and how to pick.
The four IRS payment options at a glance
| Option | What it does | Main cost | Fits when |
|---|---|---|---|
| Short-term payment plan | Up to 180 days to pay in full [2] | No setup fee; interest and penalties keep adding up [2] | You can pay soon, just not today |
| Long-term payment plan (installment agreement) | Monthly payments until the debt is paid [2] | Setup fee from $0 to $178 (IRS, March 3, 2026), plus interest and penalties [1] | You can pay in full, but it will take a while |
| Offer in compromise | Settles the debt for less than you owe [3] | $205 application fee and a first payment, unless you are an individual who meets the low-income rules [3] | You cannot pay in full, even over time |
| Currently Not Collectible status | Pauses most collection for now [4] | Interest and penalties keep adding up; the debt stays [4] | Paying anything would leave you unable to cover basic living costs [2] |
Two rules matter almost everywhere. File all your required tax returns first [2][3]. And expect interest and some penalties to keep growing until the balance is paid, unless you pay in full right away [1].
Option 1: a short-term payment plan
A short-term plan gives you up to 180 days to pay the full balance [2]. There is no setup fee [2]. Interest and penalties still add up until you finish paying [2].
You may be able to apply online as an individual. The limit is less than $100,000 in tax, penalties and interest combined (IRS, March 3, 2026) [1]. Sole proprietors and independent contractors apply as individuals [1]. Other businesses apply by phone or at a local IRS office [1].
Use it when the money is on its way. Maybe you are waiting on a customer payment, a bonus or the sale of something. Paying within 180 days keeps the extra interest small.
Option 2: a long-term payment plan
A long-term payment plan, which the IRS also calls an installment agreement, lets you pay a set amount each month [2].
Who qualifies
Most people qualify for what the IRS calls a Simple Payment Plan if they owe $50,000 or less in tax, penalties and interest [2]. Your payments must clear the debt before the IRS’s deadline to collect runs out. That is generally 10 years after the tax was assessed, meaning the date the IRS formally recorded what you owe [2].
Most businesses qualify too. The limit is $50,000 or less for most business debts [2]. It drops to $25,000 or less when the debt includes trust fund taxes [2].
Owe more than that? You may still get a plan. The IRS may ask for a form that lists your income, expenses and assets [2]. It may also decide to file a public Notice of Federal Tax Lien [2]. That notice tells others the government has a claim on your property [4].
What it costs
The setup fee depends on how you apply and how you pay. These are the IRS figures as of its March 3, 2026 update [1]:
| How you pay each month | Apply online | Apply by phone, mail or in person |
|---|---|---|
| Automatic debit from your bank account | $29 | $107 |
| Any other way (Direct Pay, check, card) | $69 | $178 |
| Low-income taxpayers | Fee waived for automatic debit; $43 otherwise | Same |
Low income here means an individual whose adjusted gross income is at or below 250% of the federal poverty level [1]. The $43 fee may be paid back if certain conditions are met [1].
Interest and some penalties are added on top until the balance is gone [1]. So a plan costs more the longer it runs.
What a plan protects you from
With some exceptions, the IRS generally will not levy while your request is being reviewed or while the plan is in effect [1]. The same holds for 30 days after a request is rejected [1]. A levy is when the IRS seizes your property to pay the debt [2].
A lien is a separate matter. Not paying your taxes on time can lead the IRS to file a Notice of Federal Tax Lien [1].
If you cannot pay it all before the deadline to collect
A partial payment plan exists for people whose monthly payments will not clear the debt in time [2]. You will need to fill in a financial statement and send papers to back it up [2]. That is a form listing your income, monthly costs and what you own. Think of it as a middle step between a normal plan and an offer in compromise.
Option 3: an offer in compromise
With an offer in compromise, the IRS agrees to take less than the full balance. It is meant for people who cannot pay in full, or for whom paying would cause real financial hardship [3]. The IRS looks at your income, your expenses and the equity in what you own [3]. Equity is what something is worth minus what you still owe on it.
The IRS generally will not accept an offer if you can pay in full another way [3]. That means through a payment plan, the equity in your assets, or both [3]. An offer is not a shortcut.
Who can apply
To be eligible, you must have filed all required returns and made your required estimated tax payments [3]. You also cannot be in a bankruptcy case that is still going on [3]. If you have employees, your federal payroll tax deposits must be up to date for this quarter and the last two [3]. The IRS has a Pre-Qualifier Tool on its website to check this first [3].
What it costs
Every application needs a $205 fee and a first payment, unless you are an individual who meets the low-income rules [3]. These are the figures on the IRS offer page as checked in October 2026. You choose how to pay [3]:
- Lump sum: pay 20% of your offer in one payment when you apply. If the IRS accepts, pay the rest in five or fewer payments.
- Periodic payments: make a first payment when you apply and keep paying while the IRS reviews it. If it accepts, keep paying until the offer is paid.
If you turn out not to be eligible, the IRS sends back the application and the fee. Your payments go toward your tax debt [3].
What happens while it is reviewed
The IRS stops most collection while it reviews your offer [3]. It also gets more time to collect, and it may file a public lien notice [3]. It may ask you for more information [3]. If it does not accept or reject your offer within two years, the offer is approved automatically [3]. Time spent on an appeal does not count toward the two years [3].
Option 4: Currently Not Collectible status
This status is for financial hardship. If paying anything would leave you unable to cover basic living costs, the IRS may put your account in Currently Not Collectible status [2][4]. That pauses most collection [4].
It does not erase anything. You still owe the full amount, and interest and penalties keep adding up [4]. The IRS may ask for a financial statement and proof of your income, living costs, bank accounts and property [4]. It may review your situation later and start collecting again if your finances improve [4]. Any federal refund you are due will be applied to the debt [4].
How to choose between the IRS payment options
Work through these questions in order:
- Can you pay in full today? Then pay. There is no setup fee, and no more interest and penalties build up [1].
- Can you pay in full within 180 days? Use a short-term plan [2].
- Can you pay in full over time with monthly payments? Use a long-term plan. Automatic debit and applying online carry the lowest fee [1].
- Will monthly payments still not clear the debt in time? The IRS’s deadline to collect is usually 10 years after the tax was assessed [2]. Look at an offer in compromise or a partial payment plan [2][3]. Try the IRS Pre-Qualifier Tool before you apply [3].
- Would any payment leave you unable to cover basic living costs? Ask about Currently Not Collectible status [2][4].
Whatever you pick, keep filing your returns and paying new taxes on time. For business owners, setting money aside each quarter can help you avoid another bill you can’t pay. Our post on quarterly tax planning for small business owners covers that.
Limits and risks
Only an accepted offer in compromise lowers what you owe, and only once you pay the agreed amount [3]. Payment plans and hardship status still add interest and penalties [1][4]. If the IRS rejects your offer, it keeps the $205 fee and applies your payments to what you owe [3]. You can appeal a rejected offer [3]. A lien notice can still be filed under several of these options [2][3][4].
Be careful with companies that promise to settle your debt for “pennies on the dollar.” Only the IRS can accept an offer, so no company can promise it will [3]. It looks at your income, expenses and assets [3]. Our post on how to avoid tax resolution scams explains the warning signs.
The figures in this post come from IRS pages and can change. Check IRS.gov before you apply.
How we can help
Not sure which of the IRS payment options fits you? We offer a free consultation through our tax resolution service. You can read our client stories on our case study page, or book a consultation.
Frequently asked questions
Which IRS payment options can I set up online?
As an individual, you may qualify to apply online for a long-term plan if you owe $50,000 or less and have filed all required returns. You may qualify to apply online for a short-term plan if you owe less than $100,000 [1]. These limits are from the IRS update of March 3, 2026. Businesses apply by phone or at a local office [1].
Do interest and penalties stop on a payment plan?
No. Interest and some penalty charges keep adding up until the balance is paid in full [1]. Paying faster lowers the total.
Can I get an offer in compromise if I can afford a payment plan?
Generally no. The IRS won’t usually accept an offer if you can pay in full through a payment plan, your assets or both [3].
Does Currently Not Collectible status forgive my tax debt?
No. You still owe the full amount, and interest and penalties continue [4]. It only pauses most collection for now.
This article is for informational and educational purposes only. It is not tax, legal or financial advice for your situation. Tax rules change, so talk with a qualified professional before you act.
Sources
- IRS: Payment plans; installment agreements: setup fees and online eligibility (updated March 3, 2026), low-income fee rules, interest and penalties, levy protection, lien notice
- IRS Topic no. 202, Tax payment options: short-term plans up to 180 days, Simple Payment Plan limits, 10-year collection period, business limits, partial payment plans
- IRS: Offer in compromise: eligibility, $205 fee, lump sum and periodic payments, review, two-year rule, rejection and appeal
- IRS: Temporarily delay the collection process: Currently Not Collectible status
