Learning Center

The experienced professionals at Edge Financial are your resource for the latest and greatest news, tips, and information for all things tax.

Setting Up A Payment Plan

We recommend handling the IRS on your own ONLY when you owe less than $5,000!

If your balance is under $5,000 and you do not have any other issues with the IRS, you are sometimes better off setting yourself up on a payment plan directly with the IRS.  But if you do owe more than $5,000.00, you may want to contact a professional and do not attempt to handle on your own. Time is of the essence.  If you do nothing the IRS will act. They will issue a levy against your wages or take the money from your bank account all at once.  You must do something to address your IRS balance.  It is better for you to voluntarily set something up with the IRS than to wait for them to act. And believe me they will act at the most inopportune moment and when you expect it least.

First some ground rules: When you owe more than $5,000.00 to the IRS, you are looked at differently because you have become more of a risk. If that is the case, you will have some hoops to jump through and may have to disclose lots of financial information.  But if you owe less than $5,000.00, you may be able to get yourself on a payment plan quite easily.  The IRS charges a one time set up fee for this privilege of allowing you to make monthly payments.  The fee is usually $105 and is a one time fee taken from the first payment.  You will be expected to make payments each month until the balance is paid in full.  They will assess penalty and interest even while you are making payments.  They will also take your year end tax refund while a balance is still owed and offset this against the balance.  What they will agree not to do is levy your wages and bank accounts as long as those payments are coming in on time, you file all future returns and do not owe any future balances.

You may ask what are other issues that could prevent you from setting up a payment plan, or where you may be better off getting a different resolution:

  • You have missing or unfilled tax return years
  • You have Civil Penalties
  • You are likely to owe money in the current or upcoming year
  • You have no assets (equity in home/cars/IRA/401k) with limited income and cannot afford a minimum payment

There are two ways to set up a payment plan with the IRS.  Once is by phone and the other is by sending in a form.  It is never good to speak to the IRS and if you are setting up your own agreement it is often best to do this by mailing in the form.  The IRS is crafty and you could say something that compromises your case or unleashes the IRS Guard Dogs in ways you may not understand.  Many times people with tax balances have other problems as well and it is better if no one is tipped off.  This is why in cases where there are other issues, it is often best to hire a professional to contact the IRS on your behalf and work as an intermediary.

If you do go the route of representing yourself, the best way to proceed is to send in the completed form 9465: Installment Agreement Request.

Before completing the form or calling into the IRS. Consider the following:

  • What day on the month do you want the payment to be due on?
    -You can choose any day between the 1st and the 28th of the month
  • How would you like to make the payments?
    -You have three choices (mailing in the payments each month, direct debit from a bank account, or payroll deduction)

By far the most popular choice is to mail in the payments.  We are familiar with mailing in payments each month for rent, utilities, car payments and other obligations.  Each month you should receive a reminder notice from the IRS but frequently you will not receive the notice.  In either case (just like rent and mortgage payments) you need to make the payment whether or not you receive your reminder in the mail.

The next most popular choice is to have your payment made each month by bank debit.  The IRS will reduce the fee it charges for setting up the payment plan from $150 down to $54* if you choose to have your payment made each month from your bank account.  It isn’t much but its something.  However if your bank account fluctuates and you cannot guarantee the funds will be in the account on the date they are due, you are better sending in your payments by mail.

The third way to set up a payment plan is to have it deducted from your paycheck.  Not all employers do this.  If yours does, and you want the amount deducted from your paycheck each month then you need to include an additional Form 2159: Payroll Deduction Agreement.

All these forms can be found online at www.irs.gov

In order to fill out these forms (or call in and make the request over the phone) you will need to have the following information:

  • Your name
  • Your Address
  • Your Social Security Number
  • If you filed jointly you will also need the name, address and SSN of the person who you filed with
  • Your Phone Number
  • Your Bank Name
  • Your Bank Account Number
  • Employer name
  • Employer Address


When you deal with the IRS you always put yourself at risk, but in small cases setting up a payment plan is your best resolution.  If you cannot afford the minimum payment, you have no assets and all your income goes to your basic living expenses, then perhaps you could call a professional to talk though the other resolutions the IRS may have for you.  They may be able to assist getting you into some type of hardship if you are unable to achieve those results on your own.

Ready to get started?