Can't Pay Your Taxes? — Here's What to Do (Don't Panic)
Owing more than you can pay on April 15 is stressful — but it's not a crisis if you handle it correctly. The single worst thing you can do is not file your return. The second worst: ignore the balance. The IRS has multiple programs for people who can't pay in full, and they'd rather work with you than against you.
See your payment plan options and total costs with the IRS Payment Plan Calculator.
Step 1: File Your Return On Time (Even If You Can't Pay)
This is the most important step. The failure-to-file penalty is 5% of unpaid taxes per month (up to 25%). The failure-to-pay penalty is only 0.5% per month. That's a 10x difference.
| Action | Penalty |
|---|---|
| File on time, can't pay | 0.5%/month + interest (~8%/year) |
| Don't file, don't pay | 5%/month + 0.5%/month + interest |
| File extension, can't pay | 0.5%/month + interest (avoids 5% FTF penalty) |
If you need more time to prepare your return, file Form 4868 for an automatic 6-month extension. This extends the filing deadline but NOT the payment deadline — interest and the 0.5% penalty still start April 15.
Step 2: Understand Your Options
| Option | You Owe | You Can Pay | Best For |
|---|---|---|---|
| Pay in full | Any | Full amount now | Always best if possible |
| Short-term plan | Under $100K | Full amount in 180 days | Temporary cash crunch |
| Long-term installment | Under $50K | Monthly over 72 months | Ongoing tight budget |
| Offer in Compromise | Any | Less than you owe | Genuinely cannot pay full amount |
| Currently Not Collectible | Any | Nothing right now | Severe hardship — no collection activity |
| Partial pay installment | Any | Some, but not all | Can pay monthly but can't cover full balance |
Step 3: What NOT to Do
| Don't... | Why |
|---|---|
| Ignore the balance | Penalties and interest grow; IRS eventually levies wages and bank accounts |
| Not file your return | 5%/month penalty is devastating |
| Pay with high-interest credit card | IRS interest (~8%) is lower than most credit cards (20%+) |
| Fall for "tax relief" scams | Companies charging $5,000–$15,000 to "negotiate" can often be done yourself for free |
| Assume they'll come after you immediately | IRS collection typically takes 6–12 months to escalate |
Step 4: Consider the Real Numbers
| Balance | Short-Term Plan (6 mo) | Long-Term Plan (5 yr) | Offer in Compromise |
|---|---|---|---|
| $5,000 | Total: ~$5,280 | Total: ~$6,500 | Often rejected (too low) |
| $15,000 | Total: ~$15,840 | Total: ~$19,500 | Possible if hardship shown |
| $30,000 | Total: ~$31,680 | Total: ~$39,000 | More likely to be considered |
| $50,000 | Total: ~$52,800 | Total: ~$65,000 | May settle for $15K–$25K |
When to Get Professional Help
| Situation | Do It Yourself | Get Help |
|---|---|---|
| Balance under $10,000, can pay in installments | ✅ Online payment agreement | Not usually needed |
| Balance $10,000–$25,000 | ✅ Can do online | Consider a tax pro |
| Balance over $25,000 | Possible but complex | Tax attorney or enrolled agent recommended |
| IRS levy or lien issued | ❌ Don't try alone | Tax attorney essential |
| Offer in Compromise | Possible | Enrolled agent or CPA strongly recommended |
Free help is available through Low Income Taxpayer Clinics (LITCs) funded by the IRS for people earning below 250% of the federal poverty level.
For all payment plan options in detail, see IRS Payment Plan Guide. For settling for less than you owe, read IRS Offer in Compromise. And if you're in severe hardship, check IRS Currently Not Collectible Status.
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