Can't Pay Your Taxes? What to Do First and Your IRS Options

Finding out you owe the IRS money you do not have is stressful. But it is one of the most common tax problems, and the IRS has set ways to handle it. The key is to act early. The IRS's options are cheapest and easiest before a balance turns into a collection case. This guide covers what to do first, your options from simplest to hardest, and what happens if you do nothing.

Step one: file on time, even if you cannot pay

Filing and paying are two separate duties, and the penalties are very different.

When both apply in the same month, the late-filing penalty is reduced by the late-payment penalty, so the combined charge is 5% a month for the first five months. After that, the late-payment penalty keeps going alone.

There is also a minimum. If a return is more than 60 days late, the late-filing penalty is at least $525 for returns due after December 31, 2025, or 100% of the unpaid tax if that is less (IRS failure-to-file penalty page).

So if you cannot pay, file anyway. If you need more time to prepare the return, an extension to file helps with the filing penalty, but it does not give you more time to pay. If you have older returns that were never filed, see unfiled tax returns.

Step two: pay what you can now

Every dollar you pay now stops interest and penalties on that dollar. The IRS charges interest daily, at 7% a year (compounded daily) for October through December 2026. Ways to pay include IRS Direct Pay from your bank account (free), your IRS Online Account, a debit or credit card (the card processor charges a fee), and cash at participating retail stores.

The IRS itself suggests, in Topic 202, that you think about whether a loan or credit card could cost less than IRS interest and penalties combined. That depends on the rate you can get. Be careful not to trade a manageable IRS balance for high-interest debt you cannot repay.

Your options, from simplest to hardest

1. Short-term payment plan (up to 180 days)

If you can pay in full within 180 days, ask for a short-term plan. There is no setup fee. Individuals who owe less than $100,000 can set it up online. Interest and penalties continue until you pay in full.

2. Long-term payment plan (installment agreement)

If you need longer, a monthly plan is the usual answer. Individuals who owe $50,000 or less and have filed all returns usually qualify for a Simple Payment Plan online. As of the IRS's March 2026 fee table, the setup fee is $29 online with direct debit, $69 online with other payment methods, and $107 to $178 by phone, mail or in person. Low-income taxpayers pay less or nothing. The late-payment penalty drops to 0.25% a month during an approved plan if you filed on time. Full details are in our IRS payment plans guide, and you can test numbers with the payment plan calculator.

3. Partial payment installment agreement

If your best monthly payment will not pay off the balance before the IRS's 10-year collection deadline, you may qualify for a partial payment plan. You will need to fill out a collection information statement and show proof of income and expenses. The IRS reviews these plans every two years.

4. Penalty relief

Penalties can be a large part of what you owe. You may qualify for relief for reasonable cause, or through the IRS's first-time and automatic relief programs. This does not erase the tax, but it can cut the total. See IRS penalty relief.

5. Offer in compromise

An offer in compromise lets some people settle for less than the full amount. The IRS generally accepts one only if you cannot pay in full through a payment plan or your assets. It costs $205 to apply in 2026 unless you meet the low-income rules. See offer in compromise.

6. Currently Not Collectible status

If paying anything would keep you from covering basic living expenses, the IRS may pause collection. The debt is not forgiven, and interest and penalties keep growing. See Currently Not Collectible status.

How to choose

• You can pay within six months: short-term plan.
• You can pay monthly and owe $50,000 or less: Simple Payment Plan online.
• You owe more, or your budget is tight: call the IRS, and expect to share income and expense details.
• You cannot pay anything right now: ask about Currently Not Collectible status.
• You could never pay it all, even over years: check the IRS's Offer in Compromise Pre-Qualifier tool.
• You think the bill is wrong: call the number on the notice and send proof. If the bill came from an audit, see audit reconsideration.

What happens if you ignore the bill

The IRS follows a set path, described in Publication 594:

1. Bills. Your first bill is often a CP14. Reminders such as the CP501 and CP503 follow. Interest and penalties keep adding up.
2. Intent to levy. A CP504 warns that the IRS may take your state tax refund and move to levy other property.
3. Final notice and hearing rights. An LT11, Letter 1058 or CP90 gives you 30 days to request a Collection Due Process hearing. If you still do not pay within 10 days after a notice of intent to levy, the late-payment penalty rises to 1% a month.
4. Collection action. The IRS can levy wages, bank accounts and some federal payments, and can file a Notice of Federal Tax Lien. It can also keep your future refunds, as described in our guide to refund offsets.

Other things can happen too. If you owe more than $66,000 in 2026 (adjusted yearly for inflation) and the debt is "seriously delinquent," the IRS can certify it to the State Department. That can block a passport, as explained on our CP508C page. The IRS may also assign some accounts to a private collection agency. See CP40.

Getting help

The Taxpayer Advocate Service (TAS) is an independent office inside the IRS. It helps people whose tax problems are causing financial hardship, or who could not get a problem fixed through normal IRS channels. Its service is free, and you can reach it at 877-777-4778. Low Income Taxpayer Clinics are independent of the IRS and can represent eligible taxpayers in collection disputes for free or a small fee. For complex cases, consider a CPA, enrolled agent or tax attorney. See choosing a tax professional.

If you get a call or text demanding immediate payment by gift card or wire, it is not the IRS. See IRS scams.

IRSV.com is an independent guide and is not affiliated with the IRS. This page is general information, not tax or legal advice. Rules change; confirm details on IRS.gov or with a tax professional. Found an error? Tell us.