If you owe tax and cannot pay it

The most expensive thing you can do about a tax bill you cannot pay is not file the return. Filing late and paying late are two different penalties, and the one for not filing is roughly ten times larger. The IRS is far more accommodating about money than about silence.

File by

15 April, even with nothing to pay

Payment plan limit

Up to $50,000 owed, up to 72 months

Set-up fee

$29–$178, reduced or waived on low incomes

Apply

Online, usually approved immediately

File first, pay second

The failure-to-file penalty is 5% of the tax due per month, up to 25%. The failure-to-pay penalty is 0.5% per month — one tenth as much. Filing on time and paying nothing is therefore ten times cheaper than filing nothing at all, and interest runs on the balance either way.

There is also a minimum penalty once a return is more than 60 days late — for 2025 returns, $510 or the full underpayment, whichever is smaller. That applies even to small balances.

An extension gives you six more months to file. It does not give you longer to pay; the tax is still due in April and interest runs from that date. This distinction catches out enormous numbers of people every year.

Pay what you can, when you file

Interest and the late-payment penalty are charged on the unpaid balance, so a partial payment reduces both. There is no advantage to waiting until you can pay in full.

Payment plans

If you owe $50,000 or less in combined tax, penalties and interest, you can apply online for a long-term payment plan of up to 72 months. Approval is usually automatic — there is no negotiation and no explanation required.

The set-up fee depends entirely on how you apply and how you pay: $29 online with direct debit, $69 online without it, $107 by phone or post with direct debit, and $178 by phone or post without. Applying online and paying by direct debit costs a sixth of the worst combination for exactly the same plan.

If your income is at or below 250% of the federal poverty guidelines, the fee is waived on direct debit plans and reduced to $43 otherwise, with the $43 potentially reimbursed later.

Short-term plans — paying in full within 180 days — carry no set-up fee at all and cover balances under $100,000, though interest still accrues.

When the amount itself is wrong

If a notice claims you owe tax you do not believe you owe, do not simply pay it to make it stop. Common causes are a return filed on the wrong form — a resident return where a non-resident one was required, or the reverse — income reported to the IRS under a wrong identification number, or a return that has genuinely been misprocessed.

Every notice carries a deadline for responding, and responding preserves options that expire if you ignore it. Free help exists: VITA volunteers can prepare and amend returns for low and moderate incomes, and the Taxpayer Advocate Service is an independent office inside the IRS for problems that ordinary channels have failed to resolve. Neither charges anything.

If the shortfall came from too little being taken out of your pay, fix the cause as well as the bill: check how much tax is withheld from your pay.