IRS Payment Plan Calculator: Interest, Penalty and Fees

“A payment plan is an agreement with the IRS to pay the taxes you owe within an extended timeframe.”

“Payment options include full payment, short-term payment plan (paying in 180 days or less) or a long-term payment plan (installment agreement) (paying monthly).”

“If you are an individual, you may qualify to apply online if: Long-term payment plan (installment agreement): You owe $50,000 or less in combined tax, penalties and interest, and filed all required returns. Short-term payment plan: You owe less than $100,000 in combined tax, penalties and interest.”

“If you owe $100,000 or less in combined tax, penalties, and interest, you can apply for a short-term payment plan by using the Online Payment Agreement (OPA) application at IRS.gov/OPA.”

“Business taxpayers should call the number on your notice, or 800-829-4933, or visit your local Taxpayer Assistance Center (TAC). If you are a sole proprietor or independent contractor, apply for a payment plan as an individual.”

“If you qualify for a short-term payment plan you will not be liable for a user fee.”

“Most individual taxpayers qualify for a simple payment plan. Generally, you’re eligible if your assessed total balance of tax, penalties, and interest owed is $50,000 or less. Your proposed payment amount must pay the tax liability in full by the CSED. Generally, this is 10 years from the date your tax was assessed.”

“The calculator must ensure full payment of all balances, including accrued penalties and interest, by the Collection Statute Expiration Date (CSED).”

“Revised content throughout to replace Streamlined Installment Agreement with Simple Payment Plan for liabilities of $50,000 or less. Removed the prior two-tier $25,000/$25,001-$50,000 structure and 72-month minimum payment rule; required use of the IAT Compliance Suite Payment Calculator to full pay by the CSED.”

“Enter on line 10 the amount you can pay each month. Make your payments as large as possible to limit interest and penalty charges. The charges will continue to accrue until you pay them in full. If you have an existing payment plan, this amount should represent your total proposed monthly payment amount for all your liabilities. If no payment amount is listed on line 10, a payment will be determined for you by dividing the balance due on line 9 by 72 months. If your proposed payment amount does not pay in full the amount of tax owed by the Collection Statute Expiration Date (CSED), your request may be considered for a partial payment plan.”

“If the IRS approves your payment plan (installment agreement), one of the following setup fees will be charged to cover the cost of providing the payment plan (installment agreement).”

“Apply online: $0 setup fee (individuals only)
Apply by phone, mail, or in-person: $0 setup fee (up to 180 days)
Plus accrued penalties and interest until the balance is paid in full”

“Option 1: Pay through Direct Debit (automatic monthly payments from your checking account), also known as a Direct Debit Installment Agreement (DDIA).
Apply online: $29 setup fee
Apply by phone, mail, or in-person: $107 setup fee
Low income: Apply online, by phone, or in-person: setup fee waived
Plus accrued penalties and interest until the balance is paid in full”

“Apply online: $69 setup fee
Apply by phone, mail, or in-person: $178 setup fee
Low income: Apply online, by phone, or in-person: $43 setup fee which may be reimbursed if certain conditions are met
Plus accrued penalties and interest until the balance is paid in full”

“Revise an existing payment plan (Installment Agreement) or reinstate after default
$6 fee, which may be reimbursed if you are identified as low income and certain conditions are met.”

“Apply (revise) online: $6 fee
Apply (revise) by phone, mail or in-person: $89 fee
Low income:
Apply (revise) online: $6 fee, which may be reimbursed if certain conditions are met
Apply (revise) by phone, mail or in-person: $43 fee, which may be reimbursed if certain conditions are met
$0 fee for changes made to existing Direct Debit installment agreements”

“Generally, the fee is $89 to reinstate or restructure your payment plan ($43 if you are a low-income taxpayer). However, the user fee is only $6 if you reinstate or restructure your payment plan through an OPA. The IRS will waive or reimburse the fee for low-income taxpayers if certain conditions are met.”

“Waiver or reimbursement of the user fees only applies to individual taxpayers with adjusted gross income, as determined for the most recent year for which such information is available, at or below 250% of the applicable federal poverty level (low-income taxpayers) that enter into long-term payment plans (installment agreements) on or after April 10, 2018. If you are a low-income taxpayer, the user fee is waived if you agree to make electronic debit payments by entering into a Direct Debit Installment Agreement (DDIA). If you are a low-income taxpayer but are unable to make electronic debit payments by entering into a DDIA, you will be reimbursed the user fee upon the completion of the installment agreement. If the IRS system identifies you as a low-income taxpayer, then the system will automatically reflect the applicable fee.”

“If you believe that you meet the requirements for low-income taxpayer status, but the IRS did not identify you as a low-income taxpayer, please review Form 13844: Application for Reduced User Fee for Installment Agreements PDF for guidance. Applicants should submit the form to the IRS within 30 days from the date of their installment agreement acceptance letter to request the IRS to reconsider their status.”

“A low-income taxpayer is a taxpayer with adjusted gross income, for the most recent tax year available, at or below 250% of the federal poverty guidelines.”

“This section applies to installment agreements under section 6159 of the Internal Revenue Code.”

“The person liable for the installment agreement fee is the taxpayer entering into an installment agreement.”

“If any amount of tax imposed by this title (whether required to be shown on a return, or to be paid by stamp or by some other method) is not paid on or before the last date prescribed for payment, interest on such amount at the underpayment rate established under section 6621 shall be paid for the period from such last date to the date paid.”

“The last date prescribed for payment shall be determined without regard to any extension of time for payment or any installment agreement entered into under section 6159.”

“Interest will continue to accrue daily on any amount not paid, including on both penalties and interest.”

“Interest and some penalty charges continue to be added to the amount you owe until the balance is paid in full.”

“The underpayment rate established under this section shall be the sum of— (A) the Federal short-term rate determined under subsection (b), plus (B) 3 percentage points.”

“The Secretary shall determine the Federal short-term rate for the first month in each calendar quarter.”

“Except as provided in subparagraph (B), the Federal short-term rate determined under paragraph (1) for any month shall apply during the first calendar quarter beginning after such month.”

“Underpayment and overpayment interest rates vary and may change quarterly. Changes don't affect the interest rate charged for prior quarters or years.”

“In computing the amount of any interest required to be paid under this title or sections 1961(c)(1) or 2411 of title 28, United States Code, by the Secretary or by the taxpayer, or any other amount determined by reference to such amount of interest, such interest and such amount shall be compounded daily.”

“Subsection (a) shall not apply for purposes of computing the amount of any addition to tax under section 6654 or 6655.”

“For individuals, the rate for overpayments and underpayments will be 7% per year, compounded daily.”

“Interest shall be imposed under subsection (a) in respect of any assessable penalty, additional amount, or addition to the tax (other than an addition to tax imposed under section 6651(a)(1) or 6653 or under part II of subchapter A of chapter 68) only if such assessable penalty, additional amount, or addition to the tax is not paid within 21 calendar days from the date of notice and demand therefor (10 business days if the amount for which such notice and demand is made equals or exceeds $100,000), and in such case interest shall be imposed only for the period from the date of the notice and demand to the date of payment.”

“We charge interest on penalties. The date from which we begin to charge interest varies by the type of penalty. Interest increases the amount you owe until you pay your balance in full.”

“We calculate the failure to pay penalty based on how long your overdue taxes remain unpaid. Unpaid tax is the total tax required to be shown on your return minus amounts paid through withholding, estimated tax payments and allowed refundable credits.”

“The failure to pay penalty is 0.5% of the unpaid taxes for each month or part of a month the tax remains unpaid. The penalty won’t exceed 25% of your unpaid taxes. If both a failure to pay and a failure to file penalty are applied in the same month, the failure to file penalty will be reduced by the amount of the failure to pay penalty applied in that month. For example, instead of a 5% failure to file penalty for the month, we would apply a 4.5% failure to file penalty and a 0.5% failure to pay penalty.”

“If you filed your tax return on time as an individual and you have an approved payment plan, the failure to pay penalty is reduced to 0.25% per month (or partial month) during your approved payment plan. If you don’t pay your tax in 10 days after getting a notice from us with our intent to levy, the failure to pay penalty is 1% per month or partial month. We apply full monthly charges, even if you pay your tax in full before the month ends.”

“to pay the amount shown as tax on any return specified in paragraph (1) on or before the date prescribed for payment of such tax (determined with regard to any extension of time for payment), unless it is shown that such failure is due to reasonable cause and not due to willful neglect, there shall be added to the amount shown as tax on such return 0.5 percent of the amount of such tax if the failure is for not more than 1 month, with an additional 0.5 percent for each additional month or fraction thereof during which such failure continues, not exceeding 25 percent in the aggregate”

“to pay any amount in respect of any tax required to be shown on a return specified in paragraph (1) which is not so shown (including an assessment made pursuant to section 6213(b)) within 21 calendar days from the date of notice and demand therefor (10 business days if the amount for which such notice and demand is made equals or exceeds $100,000), unless it is shown that such failure is due to reasonable cause and not due to willful neglect, there shall be added to the amount of tax stated in such notice and demand 0.5 percent of the amount of such tax if the failure is for not more than 1 month, with an additional 0.5 percent for each additional month or fraction thereof during which such failure continues, not exceeding 25 percent in the aggregate.”

“subsection (a)(2), the amount of tax shown on the return shall, for purposes of computing the addition for any month, be reduced by the amount of any part of the tax which is paid on or before the beginning of such month and by the amount of any credit against the tax which may be claimed on the return”

“In the case of an individual who files a return of tax on or before the due date for the return (including extensions), paragraphs (2) and (3) of subsection (a) shall each be applied by substituting "0.25" for "0.5" each place it appears for purposes of determining the addition to tax for any month during which an installment agreement under section 6159 is in effect for the payment of such tax.”

“In the case of each month (or fraction thereof) beginning after the day described in paragraph (2) of this subsection, paragraphs (2) and (3) of subsection (a) shall be applied by substituting "1 percent" for "0.5 percent" each place it appears.”

“For purposes of paragraph (1), the day described in this paragraph is the earlier of— (A) the day 10 days after the date on which notice is given under section 6331(d), or (B) the day on which notice and demand for immediate payment is given under the last sentence of section 6331(a).”

“In the case of a return filed by an individual on or before the due date for the return (including extensions)— (A) The amount added to tax for a month or fraction thereof is determined by using 0.25 percent instead of 0.5 percent under paragraph (a)(2) of this section if at any time during the month an installment agreement under section 6159 is in effect for the payment of such tax”

“Failure to Pay penalty is reduced to 1/4% per month for all accounts in an IA status which meet the criteria set forth in IRC 6651(h).”

“The taxpayer requests a Short Term Payment Plan for up to 180 days; the taxpayer is not requesting to make monthly payments. This is not an IA; therefore, no user fee is charged,”

“All payments received under the payment plan will be applied to your account in the best interests of the United States.”

“If additional taxes, penalty, and interest for one or more taxable periods have been assessed against a taxpayer (or have been mutually agreed to as to the amount and liability but are unassessed) at the time the taxpayer voluntarily tenders a partial payment that is accepted by the Service and the taxpayer does not provide specific written directions as to the application of payment, the Service will apply the payment to periods in the order of priority that the Service determines will serve its best interest. The payment will be applied to satisfy the liability for successive periods in descending order of priority until the payment is absorbed. If the amount applied to a period is less than the liability for the period, the amount will be applied to tax, penalty, and interest, in that order, until the amount is absorbed.”