Two kinds of plan
A short-term plan gives you up to 180 days to pay in full, has no setup fee, and is available when you owe less than $100,000 in combined tax, penalties and interest. A long-term plan (an installment agreement under IRC 6159) spreads monthly payments over a term you propose, and can be set up online without financial statements when you owe $50,000 or less and have filed every required return. Above that the IRS may ask for a collection information statement before agreeing.
What keeps accruing
Interest runs on the unpaid tax, on assessed penalties and on itself: it compounds daily at the federal short-term rate plus three points, reset every quarter (7% for most of 2025 and 2026). The failure-to-pay penalty is 0.5% of the unpaid tax for each month or part of a month. Inside an approved installment agreement it drops to 0.25% a month, but only for an individual whose return was filed on time. A business, or anyone who filed late, keeps the 0.5% rate. Both stop at a cumulative 25% of the tax.
The fees
Setting up a long-term plan online costs $29 if you pay by direct debit and $69 otherwise; applying by phone, mail or in person costs $107 and $178. Low-income taxpayers pay nothing for direct debit and $43 otherwise, which can be reimbursed when the agreement is completed. The calculator adds the fee for the method you choose to the total cost of the plan.
How the schedule is built
Each month the calculator charges interest on everything outstanding, adds the failure-to-pay penalty on the unpaid tax, then applies your payment to tax first, then penalty, then interest. Give it a payment and it tells you how many months the plan takes; give it a term and it solves for the level payment that clears the balance on time. A payment that does not cover the first month's accruals is reported as one that never finishes, rather than silently running for years. Quarters the IRS has not yet announced use the last published rate and are flagged as an assumption.
Worked example
An individual who filed on time owes $6,000 of tax and starts a plan on April 15, 2025, paying by direct debit set up online. Over a 12-month term the level payment comes to about $527. The first month charges $34.62 of interest (30 days at 7%, compounded daily) and $15.00 of penalty (0.25% of $6,000); by the twelfth month the balance is small and the accruals are a few dollars. The plan's total cost is about $325 of penalty and interest plus the $29 fee, a good deal cheaper than the 0.5% rate a late filer would pay, and cheaper still than a credit card.
What the tool cannot promise
The IRS applies payments in its own order, may have already assessed amounts you have not entered, and reviews agreements when income changes. The calculator does not decide whether the IRS will accept a term; it shows what a term costs. Penalty relief (reasonable cause, first-time abatement) is listed as something to request, never applied. Interest is never abated on request.
Official sources used on this page
- IRS: Payment plans; installment agreements (setup fees, low-income rules, $50,000 and $100,000 thresholds): 13-Aug-2026
- IRS: Online payment agreement application (short-term plan: 180 days, $0 fee): 02-Sep-2026
- IRM 20.1.2.3.8.1.2, 1/4 percent penalty rate: IRC 6651(h); 20.1.2.3.8.4.2, penalty months: 12-30-2025
- IRS: Quarterly interest rates (each quarter's IRB): page read 2 Sep 2026
- IRM 20.2.1.3.1.2, Compound interest (IRC 6622): 04-27-2016
Every rule record names its source, revision and the date it was last verified; the results panel prints the ones your calculation used. Rules last verified 2 September 2026.