Overview

An Online Installment Agreement (also called an Online Payment Agreement) lets you repay an IRS balance in monthly payments without immediate enforcement. The online system is the fastest way to get a standard plan, but successful applications require preparation: all required returns must be filed, you must confirm your balance, and you’ll need to verify your identity on the IRS site (IRS Online Payment Agreement). (IRS: https://www.irs.gov/payments/online-payment-agreement-application)

Step-by-step: How to apply online

  1. Confirm you’ve filed all required returns. The IRS will typically deny a payment plan if returns are missing. If you’re unsure, check your IRS Online Account or contact the IRS to confirm filing status (IRS: https://www.irs.gov/payments/installment-agreements).

  2. Verify the amount you owe. Review your current balance online or use recent IRS notices. The online tool calculates combined tax, interest and penalties for eligibility.

  3. Create or sign into your IRS Online Account. Identity verification is required. If you can’t verify online, you may need to contact the IRS for alternative setup.

  4. Use the Online Payment Agreement tool. Choose a payment option and propose a monthly amount. The tool will often show whether you qualify for a streamlined plan and the proposed schedule.

  5. Choose payment method and confirm terms. Direct debit (auto-withdrawal) is usually the most secure option and reduces the chance of missed payments; the IRS often charges a lower setup fee for direct debit plans—check current fees on the IRS site.

  6. Save confirmation and start payments. Keep the IRS confirmation and your payment schedule. Monitor your bank for successful debits and keep records of every payment.

Eligibility and thresholds (as of 2025)

  • Individuals who owe $50,000 or less in combined tax, penalties and interest are typically eligible to apply online. Small businesses may have a lower online threshold (commonly $25,000). Confirm current limits on the IRS site before applying (IRS Online Payment Agreement). If your balance exceeds online thresholds, you can still request a plan by phone or by submitting Form 9465.

Required information and documents

  • Social Security number or EIN; filing status and tax year information
  • Recent tax return(s)
  • Bank account and routing numbers (if opting for direct debit)
  • Proof of identity for the IRS online account (email, phone, and identity documents if requested)

Professional tips that help applications succeed

  • File first, apply second. Missing returns will delay or block approval. In my practice I’ve seen 50% of delays come from unfiled returns.
  • Build a realistic budget before proposing a monthly amount. The IRS will expect consistent payments; undershooting can lead to default.
  • Choose direct debit if you can. It lowers miss-risk and often reduces administrative fees.
  • Check the IRS online tool first to see if you qualify for a streamlined plan. If you don’t qualify, consider alternatives such as a partial-payment installment agreement or offer in compromise — see our guide to a partial-payment plan for more details.

Common pitfalls and how to avoid them

  • Applying without filing all returns. Remedy: file missing returns immediately and document submissions.
  • Picking an unrealistic monthly payment. Remedy: use a simple monthly budget worksheet and account for taxes due next year.
  • Ignoring notices after setup. The IRS will still send notices; respond promptly to avoid default.
  • Not verifying identity early. Identity verification problems often force paper applications and delay approval.

If you can’t make payments or need changes

  • Contact the IRS promptly to request a modification. You may be eligible to modify the plan if your financial situation changes. Document income and expenses; the IRS will ask for supporting details.
  • If payments stop, the IRS can default the agreement and pursue levy or lien actions. Reinstating requires immediate contact and often payment in full of missed installments plus a cure payment.

When to consider other options

  • If your balance is too high for the online tool, call the IRS or consider alternative solutions: partial-payment installment agreements, temporary delay of collection for hardship, or an offer in compromise if you can demonstrate inability to pay (Taxpayer Advocate Service: https://www.taxpayeradvocate.irs.gov/).
  • For guidance about calculating affordable monthly offers, see our article on calculating monthly payment offers for an IRS installment agreement.

Real-world example (brief)

A client owed $7,000 after an audit. After filing a missing return and setting up an IRS Online Account, they chose a 24-month direct debit plan. Payments cleared automatically and the plan prevented enforcement while the balance was paid in full.

Related resources on FinHelp

FAQs (short)

Q: Will the IRS remove penalties if I enter an installment agreement?
A: No. An installment agreement does not automatically remove penalties or interest. It prevents many collection actions while you pay.

Q: Are setup fees required?
A: Often yes; the IRS may charge a user fee for setting up a plan but fees and reduced-fee options (like direct debit) change — check the IRS site for current amounts.

Q: How long does the online approval take?
A: Often immediate or within a few days if you can verify identity online and meet eligibility; identity problems or missing returns can cause delays.

Authoritative sources

Disclaimer

This article is educational and does not constitute tax advice. For guidance tailored to your situation, consult a qualified tax professional or the IRS directly.