If I sent in my 2013 tax return on time and lets say I owe $xxx in self employment tax but cannot afford to send the whole amount right now why should I formally request a payment installment schedule from IRS which would require giving my bank account info etc. Why not just send in the money every month as I can afford to and pay the .5% per month late fee? My other question is would those late payments automatically be posted to social security?

It depends on how much you owe, how long you think it will take to pay it back and whether you receive any 1099's.

There is also a fee involved to set up an installment agreement of $43 to $120 depending on your circumstances.

You will be charged interest whether you have an installment agreement or just pay it off as you suggest. You are correct that the installment agreement only saves the 0.5% late payment penalty.

The payments go to the Treasury Dept and do not affect Social Security. SSA is not involved in the collection process. Your income will be reported to SSA no matter what you do.

My recommendation is that if you will be able to pay off the debt fully within 6 months, don't bother with the installment agreement.