The Federal IRS Payment Plan

The IRS lets you pay a tax debt in monthly installments through its Online Payment Agreement portal. The terms depend on your balance.

Under $100,000: You can get a short-term plan with up to 180 days to pay in full. No setup fee, though interest and penalties keep accruing.

Under $50,000 (long-term): Monthly payments for up to 72 months. Setup fee is $31 with direct debit, $130 without. You apply online in about 15 minutes. The IRS approves most of these automatically — no negotiation, no financial disclosure. Just pick a payment date and amount that covers the balance within the allowed timeframe.

Over $50,000: You’ll need Form 9465 plus a Collection Information Statement (Form 433-A). The IRS will review your income, expenses, and assets before setting a payment amount. This process takes 30 to 90 days, and the IRS doesn’t accept every proposal. They’ll calculate what you should be able to pay based on their allowable expense standards — not what you think you can afford.

California FTB Installment Agreements

The Franchise Tax Board runs California’s income tax collection, and its installment agreement program is stricter than the IRS version in a few ways.

For balances under $25,000, you can request a payment plan online through your MyFTB account. The FTB generally allows up to 60 months to pay — shorter than the IRS’s 72-month window. And unlike the IRS, the FTB expects you to pay a meaningful amount each month. Lowball proposals get rejected.

Balances over $25,000 require a financial statement and direct communication with FTB Collections. The state will review your bank statements, pay stubs, and monthly expenses. The FTB’s allowable expense guidelines are tighter than the IRS’s — they’ll push back harder on things like vehicle payments and housing costs they consider excessive.

California’s interest rate on unpaid tax debt currently sits around 7% to 8%, similar to the IRS rate. But the FTB also charges a collection cost recovery fee on accounts that go to collections, which adds several hundred dollars on top of the underlying balance. Getting ahead of this by setting up a payment plan before the account hits collections saves money.

Owing Both the IRS and the FTB

This is the scenario we see most with LA clients. Someone under-withholds, owes $15,000 to the IRS and $8,000 to California, and now needs two separate payment plans running simultaneously. The IRS and FTB don’t coordinate with each other — they’re completely independent creditors.

The combined monthly cost can be steep. On $23,000 total debt, expect combined payments of $450 to $700 per month, depending on how long you stretch the plans. Interest on both debts runs 7%+, so the longer you take to pay, the more expensive it gets.

One thing LA taxpayers should know: California files a state tax lien (called a “notice of state tax lien”) faster than the IRS files its federal version. The FTB can record a lien after sending you a final notice, and it shows up on title searches for property you own. If you’re planning to sell or refinance a home in LA, a state tax lien will complicate that transaction significantly.

What Happens if You Stop Paying

The IRS sends a notice after one missed payment and terminates the agreement after two consecutive missed payments. Once terminated, you’re back in the collections pipeline — levies on bank accounts and wages become possible.

The FTB is more aggressive. California can issue a bank levy or wage garnishment without a court order, and the FTB moves faster than the IRS in most cases. We’ve worked with clients whose bank accounts were levied within 30 days of defaulting on a state installment agreement. The FTB can also suspend your driver’s license if you owe more than $100,000 and refuse to pay — a power the IRS doesn’t have.

Both agencies will work with you if you fall behind due to a genuine hardship. Call before you miss the payment, not after. Requesting a temporary payment reduction or skip is easier than reinstating a terminated agreement.

Alternatives to a Standard Installment Agreement

If your monthly payment would need to be higher than you can manage, a few other options exist.

Offer in Compromise (IRS): You propose a lump sum that’s less than the full balance, and the IRS accepts it if they determine they can’t collect the full amount from you. Acceptance rates hover around 30%–40%, and the process takes 12 to 24 months. The IRS looks at your income, expenses, assets, and future earning potential.

Offer in Compromise (FTB): California has its own OIC program, but it’s smaller and harder to get approved. The FTB requires that you demonstrate “doubt as to collectibility” — meaning your assets and future income genuinely can’t cover the debt.

Currently Not Collectible (IRS): If you truly can’t pay anything, the IRS can put your account in CNC status. Collection activity stops, but interest keeps running. The 10-year collection statute still applies, so if the IRS can’t collect within 10 years, the debt expires. CNC status doesn’t exist at the FTB — California has no equivalent.