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Settlements & Payment Plans: Every Guide, In One Place

From Offers in Compromise to installment agreements and hardship status, these guides cover every IRS resolution program — who qualifies, what it costs, and how to apply.

If you can clear the balance quickly, pay in full or use a short-term payment plan of 180 days or less. If you need to spread payments out, a long-term installment agreement lets you pay monthly. If you cannot pay your full tax liability, or paying would create a financial hardship, an offer in compromise may be an option. The IRS asks you to explore all other payment options first.

Updated August 17, 2026

Key takeaways

• You may qualify to apply online for a short-term payment plan if you owe less than $100,000 in combined tax, penalties and interest.
• A simple installment agreement can be applied for online if you owe $50,000 or less in combined tax, penalties and interest and have filed all required returns.
• A long-term plan paid by direct debit has a $29 setup fee, waived for low income; non-direct debit is $69, or $43 for low income.
• An offer in compromise requires a $205 non-refundable application fee and an initial payment unless you meet the low income certification guidelines.
• If your offer in compromise is rejected, you may appeal within 30 days using Form 13711, Request for Appeal of Offer in Compromise.

Should I request a payment plan or an offer in compromise?

Start with how much you can actually pay. The IRS lists three basic paths for an individual balance: full payment, a short-term payment plan of 180 days or less, or a long-term payment plan (installment agreement) paid monthly. Your specific tax situation determines which options are available to you.

An offer in compromise is different. It allows you to settle your tax debt for less than the full amount you owe, and the IRS describes it as a possible option if you cannot pay your full tax liability or doing so creates a financial hardship. The IRS weighs your ability to pay, income, expenses and asset equity, and generally approves an offer when the amount offered represents the most it can expect to collect within a reasonable period of time.

The IRS is direct about sequencing: explore all other payment options before you submit an offer in compromise, and it states that the Offer in Compromise Program is not for everyone. You can confirm eligibility and prepare a preliminary proposal with the Offer in Compromise Pre-Qualifier Tool, and you can check eligibility, make payments and file an offer through your Individual Online Account. If you hire help, the IRS advises checking the qualifications of any tax professional you use.

Do I qualify to apply for an IRS payment plan online?

Qualified individual taxpayers and authorized representatives can apply online. For a simple payment plan (installment agreement) you may apply online if you owe $50,000 or less in combined tax, penalties and interest and have filed all required returns. For a short-term payment plan, the online threshold is owing less than $100,000 in combined tax, penalties and interest. Sole proprietors and independent contractors apply as individuals.

To apply you need an IRS Online Account, which requires photo identification. If you want a direct debit plan, have your bank routing and account numbers ready. If you recently filed or your return was examined but no balance notice has arrived, you will need the balance due shown on your return. Once you complete the online application, you receive immediate notification of whether your payment plan has been approved.

• Setup fees may be higher if you apply by phone, mail, or in-person.
• Business accounts cannot apply online; call the number on your notice or 800-829-4933, 7 a.m. to 7 p.m. local time.
• A representative must use a Tax Pro Account or apply offline, and Form 2848 must cover all tax periods with a balance due.

What happens after I submit an offer in compromise?

Your application package includes Form 433-A (OIC) for individuals or Form 433-B (OIC) for businesses with all required documentation, Form 656 or separate Forms 656 for individual and business tax debt, the $205 non-refundable application fee, and a non-refundable initial payment for each Form 656. You can mail it to a designated site listed in Form 656-B or file online through your Individual Online Account.

Your payment option shapes the initial payment. Under the lump sum option you submit 20% of the total offer amount with your application and pay any remaining balance in five or fewer payments if the offer is accepted. Under the periodic payment option you submit your initial payment with the application and keep paying monthly while the IRS considers the offer.

While the IRS evaluates your offer, your non-refundable payments and fees are applied to the tax liability, the IRS may file a notice of federal tax lien, other collection activities are suspended, and the legal assessment and collection period is extended. You do not have to make payments on an existing installment agreement. If the IRS does not make a determination within two years of its receipt date, the offer is automatically accepted. If the offer cannot be processed, the IRS returns the application and fee.

IRS individual payment and settlement options compared

What the IRS says

“We generally approve an offer in compromise when the amount you offer represents the most we can expect to collect within a reasonable period of time.”

— IRS, Offer in compromise, IRS — Offer in compromise https://www.irs.gov/payments/offer-in-compromise

Frequently asked questions

What if I cannot afford the minimum monthly payment the online tool requires?

If your proposed amount does not meet the requirements, the online payment agreement tool prompts you to revise it. If you cannot make the minimum required payment amount, you will receive directions for completing either Form 9465, Installment Agreement Request, and Form 433-F, Collection Information Statement, or the consolidated Form 433-H, Installment Agreement Request and Collection Information Statement.

Can a business set up a payment plan or pay an offer online?

Business accounts are unable to apply online for a payment plan. You may contact the phone number on your notice or call 800-829-4933, with representatives available 7 a.m. to 7 p.m. local time. For an offer in compromise, a business can pay online using its Business Tax Account, but must mail Form 656 and Form 433-B (OIC) to the address shown in Form 656.

What happens if the IRS rejects my offer in compromise?

You may appeal a rejection within 30 days using Form 13711, Request for Appeal of Offer in Compromise. The IRS Independent Office of Appeals offers additional assistance on appealing a rejected offer. Separately, if the IRS cannot process your offer at all, it notifies you in writing, returns the application and offer application fee, and applies any offer payment you included to your balance due.

Does the IRS keep collecting while my offer is under review?

The IRS suspends other collection activities while it evaluates your offer, though it may file a notice of federal tax lien. Your non-refundable payments and fees are applied to the tax liability, and you may designate payments to a specific tax year and tax debt. Your legal assessment and collection period is extended, and you do not have to make payments on an existing installment agreement.

Which settlements & payment plans guide do I need?

All 49 Clarity guides on settlements & payment plans, newest research first. Each one covers a single situation end to end.

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Which settlements & payment plans guide do I need?

All 49 Clarity guides on settlements & payment plans. Each one covers a single situation end to end.

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