What Happens If You Owe Taxes and Can’t Pay by the Deadline? Here Are Your Real Options
Written by
Jordan Rosenfeld
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Jenna Klaverweiden
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Owing taxes can feel immediately overwhelming, but tax professionals say it doesn’t have to be a reason to panic. So long as a taxpayer takes decisive action and communicates with the IRS, there are options.
Tax professionals explain what taxpayers can do if they can’t pay their tax bill by the deadline.
What Happens Right After You Miss the IRS Payment Deadline
If you owe taxes and miss the payment deadline, the IRS does not take immediate enforcement action, but it does start a clock that never stops until you pay it off.
“Interest and penalties begin accruing and the account starts moving through the collection system. The balance gets more and more expensive and enforced collections are on the way,” said Stephen A. Weisberg, principal attorney and founder at The W Tax Group, a nationwide tax defense company.
The first thing you’ll likely receive is a letter from the IRS demanding payment, said Jim Buttonow, owner and principal at JL Buttonow CPA PLLC. These notices are part of the IRS collection process and should not be ignored.
How Fast Interest and Penalties Add Up
Many taxpayers underestimate how quickly IRS costs accumulate. “Interest and penalties start occurring the day after the payment deadline and never pause,” Weisberg said. The failure to pay penalty maxes out at 25% of the assessed balance.
It is typically possible to make an agreement with the IRS to pay installments of lesser amounts or go into collections, Buttonow said. The key move is to communicate early with the IRS and let it know you’ll be taking some kind of action.
IRS Payment Plans and Relief Options
Not being able to pay in full does not mean there are no options.
“The IRS allows multiple types of monthly payment plans,” Weisberg said. He explained that taxpayers may qualify for short-term extensions, multiple types of payment plans, and under certain circumstances reduced payment arrangements or hardship status.
“The key is determining the right option based on the taxpayer’s circumstances and financial picture,” he said.
Short-Term Extensions vs. Long-Term Installment Agreements
All IRS payment plans are not interchangeable, and choosing the wrong one can create new financial strain. The main difference comes down to how quickly the balance must be paid off.
Weisberg explained that taxpayers need to be realistic about whether they need a short-term or long-term installment plan. A short-term payment plan is essentially a brief extension, usually six months to pay in full. Long-term installment agreements spread payments out over years.
What Happens If You Don’t Set Up an Agreement
If no payment plan or relief option is in place, the IRS can escalate collection efforts. Buttonow said that taxpayers who do not obtain an agreement “can face IRS enforcement levies, garnishments liens and even passport restrictions if they owe more than $66,000.”
Weisberg added that unpaid balances can also lead to wage garnishments, which means back taxes are automatically deducted from paychecks. The IRS will also likely take your refund if you have one due until your back taxes are owed from prior years.
Common Mistakes That Make Tax Debt Worse
Tax professionals say the biggest mistakes are driven by fear or delay, not the original tax bill. According to Weisberg, “ignoring notices assuming the tax debt will go away, pulling money from retirement accounts without a strategy or setting up a payment plan that you can’t afford” are among the most common errors.
Buttonow said the situation often worsens when taxpayers stay “in the pattern of filing and owing,” especially among “small business owners and gig economy workers who are responsible for their own withholding in estimated tax payments.”
When To Get Professional Help Instead of Handling It Alone
Some tax situations can be handled directly with the IRS, while others require professional guidance. Knowing where that line is can prevent long-term damage.
Weisberg said professional help makes sense “when the balance is large, multiple years are involved, enforcement has started or the taxpayer isn’t sure what’s best for them or what the IRS is allowed to do.”
Why Waiting Is the Biggest Risk of All
Delaying action reduces flexibility and limits the number of available solutions.
“People think they need to be able to pay off the entire balance before resolving their case or that talking to the IRS will automatically trigger enforcement,” Weisberg said. “The earlier you deal with it the more control and leverage you’ll have over the situation.”
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