# What will my tax payment plan cost?

Estimates the monthly payment on an IRS payment plan (installment agreement), with daily interest, the reduced failure-to-pay penalty, and the 2026 setup fee.

- Page: https://www.acalculator.org/finance/irs-payment-plan-calculator
- JSON spec: https://www.acalculator.org/finance/irs-payment-plan-calculator.json
- Version: fc0b2282b401

## Default answer

Example with the default inputs (Amount you owe $10,000.00, Months to pay 36, How you apply Online, Direct debit from a bank account Yes, Low income No, Return filed on time Yes, IRS interest rate 7%): Paying $10,000.00 over 36 months costs about $322.76 a month, plus a $29.00 setup fee.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| owed | Amount you owe | Tax, penalties and interest owed now. |
| months | Months to pay | How many monthly payments: 6 or fewer is a short-term plan, up to 72 for a long-term plan. |
| apply | How you apply | Online, or by phone, mail or in person. The setup fee depends on it. |
| dd | Direct debit from a bank account | A direct debit installment agreement has a lower setup fee. |
| low | Low income | Adjusted gross income at or below 250% of the federal poverty guidelines. |
| ontime | Return filed on time | With an on-time return the penalty drops to 0.25% a month while the plan is in place. |
| rate | IRS interest rate | The IRS underpayment rate for individuals, a year; 7% in the fourth quarter of 2026. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| payment | Monthly payment | The level payment each month. |
| fee | Setup fee | The IRS fee to set up the plan. |
| interest | Interest | Interest over the plan. |
| penalty | Failure-to-pay penalty | Penalty over the plan. |
| total | Total cost | All payments plus the setup fee. |
| planType | Plan type | Short-term (180 days or less) or long-term. |
| note | Note | Limits that apply to this plan. |

## Method

Monthly interest i = (1 + rate ÷ 365)^(365 ÷ 12) − 1; monthly penalty p = 0.25% (0.5% if the return was late). Payment = B × j ÷ (1 − (1 + j)^−n) with j = i + p. Each month the balance grows by i + p and the payment comes off. Setup fee: $0 short-term; long-term $29 online direct debit, $69 online, $107 phone direct debit, $178 phone; low income $0 direct debit or $43.

## Assumptions

- 2026 setup fees and the 7% fourth-quarter 2026 interest rate from irs.gov; the rate changes each quarter, so type the current one.
- Interest compounds daily on the balance; the page takes it monthly, with each payment at the end of the month. The penalty is charged on the whole unpaid balance; the IRS charges it on unpaid tax only, so this overstates it a little when the balance already holds penalties and interest. The 25% penalty cap is never reached within 72 months.
- The IRS decides whether you qualify. It is an estimate, not tax advice.

## Worked examples

1. owed = $10,000.00, months = 36, apply = online, dd = yes, ontime = yes, rate = 7% gives payment = $322.76, fee = $29.00, interest = $1,134.63, penalty = $484.90. Source: IRS, Payment plans; installment agreements, https://www.irs.gov/payments/payment-plans-installment-agreements; IRS Quarterly interest rates, https://www.irs.gov/payments/quarterly-interest-rates.
2. owed = $5,000.00, months = 6, apply = phone, dd = no, ontime = yes, rate = 7% gives fee = $0.00, planType = Short-term (180 days or less). Source: IRS, Payment plans; installment agreements, https://www.irs.gov/payments/payment-plans-installment-agreements; IRS Quarterly interest rates, https://www.irs.gov/payments/quarterly-interest-rates.
3. owed = $20,000.00, months = 72, apply = phone, dd = no, ontime = no, rate = 7% gives fee = $178.00. Source: IRS, Payment plans; installment agreements, https://www.irs.gov/payments/payment-plans-installment-agreements; IRS Quarterly interest rates, https://www.irs.gov/payments/quarterly-interest-rates.
4. owed = $12,000.00, months = 24, apply = online, dd = yes, low = yes, ontime = yes, rate = 0% gives fee = $0.00. Source: IRS, Payment plans; installment agreements, https://www.irs.gov/payments/payment-plans-installment-agreements; IRS Quarterly interest rates, https://www.irs.gov/payments/quarterly-interest-rates.

## FAQ

### How much does an IRS payment plan cost to set up?

In 2026, a short-term plan (180 days or less) has no setup fee. A long-term plan costs $29 online with direct debit, $69 online without it, $107 by phone, mail or in person with direct debit, and $178 without it. Low-income taxpayers pay nothing with direct debit, or $43 that may be reimbursed.

### Does interest keep growing on a payment plan?

Yes. Interest at the IRS underpayment rate (7% a year in the fourth quarter of 2026) compounds daily on the unpaid balance until it is paid. The failure-to-pay penalty also continues, at a lower rate.

### What is the failure-to-pay penalty on a payment plan?

Normally 0.5% of the unpaid tax for each month. If you filed your return on time and have an approved plan, it drops to 0.25% a month. It never goes above 25% of the unpaid tax.

### How long can an IRS payment plan last?

A short-term plan lasts up to 180 days and needs less than $100,000 owed. A long-term plan applied for online needs $50,000 or less owed and usually runs up to 72 months.

### How is the monthly payment worked out?

The page treats the debt like a loan: each month the balance grows by the monthly interest and penalty, and a level payment pays it off in the months you choose. $10,000 over 36 months at 7% with the 0.25% penalty is about $322.76 a month.

### Can I pay off the plan early?

Yes. Paying more or paying off early cuts the interest and penalty, since both are charged on the balance still owed.

## Sources

- IRS, Payment plans; installment agreements: setup fees, short-term and long-term limits (retrieved 2026-10-05). https://www.irs.gov/payments/payment-plans-installment-agreements
- IRS, Failure to pay penalty: 0.5% a month, 0.25% on a payment plan with an on-time return, 25% cap (retrieved 2026-10-05). https://www.irs.gov/payments/failure-to-pay-penalty
- IRS, Quarterly interest rates: 7% for individuals in the fourth quarter of 2026, compounded daily (retrieved 2026-10-05). https://www.irs.gov/payments/quarterly-interest-rates