Getting a notice from the IRS indicating an outstanding balance can be alarming, particularly if one is unable to pay the entire amount at once.
Fortunately, the Internal Revenue Service provides payment plans that enable taxpayers to settle their tax obligations in installments. Many taxpayers are curious about the minimum payment the IRS will accept in 2026 and the mechanics of these agreements.
What constitutes an IRS payment plan?
An IRS Installment Agreement is a formal arrangement that permits taxpayers to repay their tax liabilities over a designated time frame. This option is intended for people who do not qualify for debt forgiveness or for “currently not collectible” status, yet can manage to pay the amount gradually.
It is crucial to recognize that a payment plan does not eliminate interest or penalties. These charges will continue to accumulate until the debt is fully settled, although it aids in preventing more drastic actions such as wage garnishment or bank levies.
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What is minimum monthly payment IRS will accept in 2026?
For the majority of long-term payment plans, the minimum monthly payment is determined by dividing the total debt by 72 months, or six years. This standard will remain in effect in 2026.
For instance, if a taxpayer owes $36,000 in taxes, including interest and penalties, the minimum monthly payment would be roughly $500 (36,000 ÷ 72).
The IRS permits a different amount to be proposed, provided it is supported by financial documentation. However, if the taxpayer fails to propose an amount, the IRS will automatically utilize this calculation.
Types of IRS payment plans available
There are three types of IRS payment plans:
Short-term plan: Applicable for debts under $100,000. This plan allows payment over a maximum of 180 days and does not incur a set-up fee.
Long-term plan: Suitable for debts up to $50,000. This plan extends beyond 180 days and necessitates monthly payments.
Companies carrying debts of up to $25,000 are eligible for long-term payment plans. For debts exceeding this amount, the IRS may mandate automatic payments through direct debit.
Establishing a payment plan involves a fee that differs based on the selected method. The most economical choice is online direct debit. Furthermore, the IRS imposes interest on the remaining balance, which is determined by the federal short-term rate plus an additional 3%, along with a monthly late payment penalty of 0.5%. Making payments ahead of schedule can greatly diminish these extra costs.