What to do if you owe taxes and can't pay

If you owe federal tax you can't pay, file your return on time anyway and pay what you can. Then set up an IRS payment plan online; if you owe less than $100,000 you can get up to 180 days with no setup fee.

File by the deadline no matter what

The failure to file penalty is 5% of unpaid tax for each month or part of a month the return is late, up to 25%. A return more than 60 days late has a minimum penalty of $525 or 100% of the tax owed, whichever is less.

The late payment penalty is small

The failure to pay penalty is 0.5% of unpaid tax per month, up to 25%. If you filed on time and have an approved payment plan, it drops to 0.25% per month.

Two kinds of payment plan

A short-term plan gives up to 180 days if you owe less than $100,000 in tax, penalties and interest, with no setup fee. A long-term plan gives monthly payments if you owe $50,000 or less when you apply online.

An extension does not delay payment

Form 4868 gives you until October 15 to file, but tax is still due on April 15. Penalties and interest on unpaid tax start the day after the payment deadline.

Your first three moves

First, file your return by the deadline. If you need more time to get it right, file Form 4868 for an extension, but know that it only delays the paperwork. Second, pay whatever you can by the payment deadline. Every dollar you pay stops earning penalty and interest.

Third, set up a payment plan for the rest. You can do it in your IRS online account, by phone, or by mailing Form 9465. If you owe $50,000 or less in tax, penalties and interest, you can apply online and usually get an answer right away.

What payment plans cost

A short-term plan, up to 180 days, has a $0 setup fee. A long-term plan, often called an installment agreement, costs $29 to set up online with automatic bank payments or $69 online without them. Applying by phone, mail or in person costs more, starting at $107.

If your income is at or below 250% of the federal poverty level, the IRS waives the long-term fee when you choose automatic payments, or refunds it when you finish the plan. On any plan, interest and the reduced penalty keep adding up until the balance is paid, so pay it off early if you can.

Comparing a plan with a credit card or loan

The IRS interest rate is the federal short-term rate plus 3 percentage points, reset every quarter. It was 7% a year in the last quarter of 2026. Add the plan penalty of 0.25% a month, about 3% a year, and an IRS plan costs roughly 10% a year.

Credit cards often charge 20% or more, and card payments to the IRS carry a processing fee. A plan is usually cheaper. A loan only makes sense if its total rate, with fees, is clearly lower than the IRS cost.

If you truly can't pay anything

Call the IRS and explain. If paying would leave you unable to cover basic living costs, the IRS can mark your account currently not collectible and pause most collection. You still owe the tax, interest and penalties keep growing, future refunds go toward the debt, and the IRS may file a tax lien.

An offer in compromise lets some people settle for less than they owe, when the IRS agrees the offer is the most it can expect to collect. It has a $205 application fee, waived for low-income applicants, and you must be current on all filing. Try the IRS pre-qualifier tool before paying anyone to file one for you.

Asking for penalty relief

If you filed and paid on time for the past 3 years with no penalties, you may qualify for first-time penalty relief on the late filing and late payment penalties. Call the number on your notice or send Form 843. Interest tied to a removed penalty is removed too.

The IRS is moving this relief to an automatic system, called Automatic Exemption from Penalty, starting in summer 2026. If your record qualifies, the penalty is not charged in the first place. Serious events like illness or a disaster can also count as reasonable cause.

Stopping it from happening again

Most surprise bills come from too little withholding: two jobs, a side gig, or a big raise. Update your Form W-4 with the IRS withholding estimator so more tax comes out of each paycheck.

If you have freelance or gig income, set aside a share of each payment and make quarterly estimated payments. The IRS expects them when you will owe $1,000 or more for the year.