Can't pay taxes? Compare your IRS options by cost

Can't pay taxes? File on time anyway

The single biggest money saver when you can't pay taxes is to send the return by the deadline. For tax year 2026 that is Thursday, April 15, 2027, or October 15, 2027 with an extension. The penalty for filing late is 5% of the unpaid tax per month, while the penalty for paying late is 0.5% per month.

When both apply in the same month, the IRS reduces the filing penalty by the payment penalty, so the combined charge is 5% a month for the first five months. After five months the filing penalty is maxed out, but the payment penalty keeps going until it hits its own 25% cap.

Worked example: $10,000 you can't pay by the deadline

Interest comes on top in every row, at about 7% a year compounded daily for late 2026, so roughly $350 over six months on $10,000. The gap between the first and last rows is about $2,250, and it comes purely from not filing.

Pay part now to cut what you owe later

Both the penalty and the interest are figured on the unpaid balance. Every dollar you send by the due date is a dollar that never collects either charge. If you can pay $4,000 of a $10,000 bill on April 15, the monthly payment penalty falls from $50 to $30.

Partial payments through IRS Direct Pay or your online account are free and post to the tax year you choose. Keep the confirmation number. Our back taxes guide explains how partial payments fit into the overall plan.

Short-term plan versus installment agreement

These are the two arrangements most people use when they are unable to pay taxes in one go. The deciding question is whether you can clear the balance within 180 days.

A short-term payment plan costs nothing to set up if your total tax, penalties and interest are under $100,000. You pay on your own schedule within 180 days. A long-term installment agreement suits people who need monthly payments; individuals who owe $50,000 or less can apply online.

Can the IRS refuse a payment plan?

Yes. The most common block is an unfiled return: individuals must be current on filing before an installment agreement is approved. People who owe more than $50,000 cannot apply online and must request a plan by mail on Form 9465, with Form 433-F if the instructions require it, by phone, or in person. A rejected request comes with appeal rights.

Some balances qualify for a guaranteed installment agreement. Under the Form 9465 instructions, the tax owed must be $10,000 or less, you must pay it in full within 3 years, and in the past 5 tax years you must have filed and paid on time and not had another income tax installment agreement. While any plan is active, the IRS applies future refunds to the balance until it is paid.

Offer in Compromise and hardship status

An Offer in Compromise settles the debt for less than the full amount when the IRS agrees you cannot realistically pay it. You file Form 656 with Form 433-A (OIC), pay a $205 application fee, and send either 20% of a lump-sum offer or the first payment of a periodic offer. Low-income applicants skip the fee and payments during review.

Run the free IRS Pre-Qualifier tool before paying anyone to prepare an offer. The IRS warned in its 2026 Dirty Dozen list about offer mills that charge high fees to people who are unlikely to qualify.

Currently Not Collectible status is for people who cannot pay anything without losing the ability to cover basic living costs. The IRS may pause collection, but the debt stays, interest and penalties keep growing, a lien may still be filed, and your finances are reviewed again later. Expect to supply Form 433-F or 433-A with proof of income, expenses and assets.

Comparing the cost of each option when you can't pay a tax bill

Putting the bill on a credit card is another route. The card processor charges a percentage fee that the IRS never receives, and your card's own interest rate then applies. Add both together and compare that total against the plan costs above before deciding; the fees are listed on our guide to paying back taxes.

Penalties can sometimes be avoided or removed. Under the Automatic Exemption from Penalty the IRS announced in July 2026, eligible taxpayers with a clean compliance history have late filing and late payment penalties left off during processing, with no request needed. It began with tax year 2025 returns and replaces First Time Abate for returns originally due on or after January 1, 2027. Details on how the late payment charge is figured are on our failure-to-pay penalty page.