What to Do If You Owe Taxes and Can’t Pay by the Deadline

Posted on 03/19/2025

With tax season in full swing, many taxpayers find themselves facing an unexpected balance due. If you owe taxes and can’t pay by the deadline, it’s important to take action immediately to avoid penalties and interest. Here’s what you need to know about your options and how to manage your tax bill.

1. File Your Tax Return on Time
Even if you can’t pay your full balance, file your tax return or request an extension by the deadline. Failure to file results in a failure-to-file penalty of 5% of your unpaid taxes per month, which can quickly add up. Filing on time helps minimize additional penalties.

2. Pay What You Can Immediately
The IRS charges interest and penalties on unpaid taxes, so it’s best to pay as much as possible upfront. Even a partial payment can help reduce what you owe over time. The IRS accepts credit cards, debit cards, and bank transfers for payments.

3. Set Up an IRS Payment Plan
If you can’t pay your full tax bill right away, the IRS offers payment plans, including:

Short-Term Payment Plan: If you can pay your balance in 180 days or less, no setup fee is required.
Long-Term Installment Agreement: For balances that need more time, the IRS offers monthly installment agreements. Fees apply, but it allows you to pay over time.

You can apply for a payment plan directly through the IRS website or by working with a tax professional.

4. Consider an Offer in Compromise (OIC)
An Offer in Compromise allows some taxpayers to settle their tax debt for less than the full amount owed. This option is available for those experiencing financial hardship, but approval depends on factors like income, expenses, and ability to pay. A tax professional can help determine if you qualify.

5. Request a Hardship Delay
If you’re experiencing severe financial difficulties, you may qualify for "Currently Not Collectible" status, which temporarily suspends IRS collection efforts. This does not erase the debt, but it prevents wage garnishments and tax liens while you get back on track financially.

6. Avoid Future Tax Debt
To prevent owing taxes in the future:

Adjust your withholding or estimated tax payments to better match your income.
Keep track of deductions and credits that can lower your tax liability.
Work with a tax professional to develop a strategic tax plan for the upcoming year.

Get Professional Tax Assistance Today
Owing taxes can feel overwhelming, but you don’t have to face it alone. Charles Ray & Associates can help you explore your options, negotiate with the IRS, and find the best solution for your situation.

Call (202) 824-8123 today for expert tax relief assistance.