If you can’t afford your tax bill, ignoring it will only make the problem worse. The IRS charges daily interest, penalties, and can eventually garnish wages or seize assets. The good news: you have several options to manage your tax debt and protect yourself.
What Happens If You Don’t Pay Your Taxes?
- Immediate penalties and interest start the day after the deadline. Interest is compounded daily.
- Within months, the IRS will send letters outlining your debt, penalties, and next steps.
- If ignored, the IRS may file a tax lien that alerts creditors the government has a claim on your property.
- After a “Final Notice of Intent to Levy,” the IRS can garnish wages, seize bank accounts, or even take property.
What Should You Do First?
Even if you can’t pay in full:- File on time to avoid the heavy “failure to file” penalty.
- Request an extension if you need more time to prepare paperwork (but note this does not extend the payment deadline).
- Pay what you can immediately—it reduces both interest and penalties.
What Are Your Payment Options With the IRS?
- Online Payment Plans
- Short-term plan: Up to 120 days if you owe less than $100,000.
- Long-term plan: Monthly payments for more than 120 days if you owe less than $50,000.
- You can also update existing plans online (dates, amounts, bank info).
- Installment Agreement (Form 9465)
- Options include Guaranteed, Streamlined, Non-streamlined, and Partial Payment plans.
- Fees may apply depending on income.
- Submitting an IA also extends the IRS’s collection period, giving you more time.
- Offer in Compromise (OIC)
- Allows you to settle for less than you owe if full payment would cause financial hardship.
- Use the IRS’s free OIC pre-qualifier tool to see if you’re eligible.
- Currently Not Collectible Status
- If you can prove financial hardship, the IRS may temporarily pause collections until your situation improves.
- Penalty Relief
- Available if you tried to comply with tax laws but couldn’t due to circumstances beyond your control.
Should You Handle This Alone?
Tax law and IRS processes are complex. A tax relief professional can:- File your taxes correctly and on time.
- Help you claim the right credits and deductions.
- Negotiate directly with the IRS on your behalf.
- Stop collections and give you peace of mind.
Next Steps If You Can’t Afford Your Taxes
- File your return on time to avoid larger penalties.
- Pay what you can right away.
- Apply for a payment plan or Installment Agreement.
- Check eligibility for Offer in Compromise or hardship status.
- Consult a tax relief professional for the best strategy.
Frequently Asked Questions
If you miss even one day of tax due date, the IRS will immediately start collecting interest and penalties.
The IRS offers a short-term payment plan (120 days or less) for bills that are less than $100,000. And long-term monthly plans are available for balances less than $50,000.
Pay as much of your tax bill as you can, and consult an experienced tax lawyer to figure out which payment plan is suitable for the remaining amount.
If you purposely dodge paying your taxes, yes, it’s a major crime. In the end, it could lead to five years in jail and a fine up to $250,000 for individuals (or $500,000 for businesses).