{"id":20585,"date":"2023-11-29T11:00:00","date_gmt":"2023-11-29T17:00:00","guid":{"rendered":"https:\/\/resource-center.hrblock.com\/"},"modified":"2024-04-26T11:07:59","modified_gmt":"2024-04-26T16:07:59","slug":"cannot-pay-taxes","status":"publish","type":"post","link":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/irs\/refunds-and-payments\/cannot-pay-taxes\/","title":{"rendered":"What happens if you don’t pay taxes on time? Next steps & helpful tips"},"content":{"rendered":"\n

Taxes are a part of life for most people, and sometimes they catch us off guard, financially speaking. Say you file a tax return and don\u2019t have enough money in the bank to cover your tax bill.<\/p>\n\n\n\n

If you\u2019re like many other taxpayers, you may question, \u201cWhat if I can\u2019t pay my taxes?\u201d<\/p>\n\n\n\n

First, don\u2019t delay taking action \u2013 tax compliance is critical. When you owe taxes and don\u2019t pay, you could get hit with an IRS late payment penalty as well as interest on taxes owed.<\/p>\n\n\n\n

Second, don\u2019t panic! There\u2019s something called an IRS installment agreement that helps individuals set up a payment plan to cover taxes owed to the IRS.<\/p>\n\n\n\n

Nonetheless, if you can\u2019t pay your taxes on time, you\u2019ll want to get informed on the right course of action to take. Read along to learn what happens if you don\u2019t pay taxes owed \u2013 on time or at all \u2013 and how to resolve the situation. Luckily, there are just a few steps to master!<\/p>\n\n\n\n

Interest on taxes owed<\/strong><\/h2>\n\n\n\n

In most cases, if you don\u2019t pay your owed taxes on time, you\u2019ll accrue interest on any unpaid tax from the tax return’s due date until the payment date. The IRS interest rate<\/a> is the federal short-term rate plus 3%. The IRS states the rate is set every quarter and interest compounds<\/a> daily.<\/p>\n\n\n\n

You\u2019ll also accrue interest on late-filing penalties, which we\u2019ll outline in the next section.<\/p>\n\n\n\n

IRS late payment penalty <\/strong><\/h2>\n\n\n
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Unfortunately, those who don\u2019t pay their owed taxes on time also face an IRS late payment penalty. Rather than a flat amount, it\u2019s a graduated rate based on how much you owe and how late the payment is. Let\u2019s dig into the details.<\/p>\n\n\n\n

The IRS late payment penalty (sometimes called the failure to pay penalty) is 0.5% for each month, or part of a month, up to 25% of the tax amount that is unpaid from the due date of the return (until the tax is paid in full.) The 0.5% increases to 1% if the tax is unpaid 10 days after an IRS notice of intent to levy property has been issued. If you file your return by the due date and request an installment agreement, the one-half of 1% rate lessens to one-quarter of one percent for any month in which an installment agreement is active.<\/p>\n\n\n\n

Keep in mind, this formula still applies if you only pay some of your taxes by the due date. Say you file on time but don\u2019t pay the total amount due. In this case, you\u2019ll usually have to pay a late payment tax penalty.<\/p>\n\n\n\n

Learn more about IRS late payment penalty<\/a> details.<\/p>\n\n\n\n

IRS installment agreement<\/h2>\n\n\n\n

There\u2019s good news if you haven\u2019t missed the tax deadline on tax day<\/a> and know you can\u2019t pay what you owe. You can turn to something called an IRS installment agreement. It\u2019s a formal agreement between you and the Internal Revenue Service to pay your federal tax debt over a period of time when you can\u2019t pay the total amount owed by the tax deadline<\/a>.<\/p>\n\n\n\n

Request an installment agreement using the steps below.<\/p>\n\n\n\n

Need more help with an extension, an IRS installment agreement, or a payment plan? Contact our experienced tax pros<\/a>!<\/p>\n\n\n\n

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  1. Complete an online payment agreement<\/a> if you qualify (instead of completing and filing Form 9465: Installment Agreement Request on paper). You can file an online application if you have an outstanding tax balance of $50,000 or less in combined taxes, penalties, and interest, and have filed all required tax returns. If the IRS approves your request, they\u2019ll set up a monthly payment plan to pay off what you owe.<\/li>\n\n\n\n
  2. If you don\u2019t qualify to complete an online agreement, complete and send Form 9465 to the IRS.<\/li>\n\n\n\n
  3. Make sure you pay the following fees along with your long-term payment plan application. They are as follows:<\/li>\n<\/ol>\n\n\n\n