If you owe money you don’t have, here’s exactly what to do and what to avoid.
TL;DR: File your return by April 15 no matter what. Not filing costs far more than not paying. The IRS has formal repayment options, and proactive action can dramatically reduce what you’ll ultimately owe.
What Happens If I Don’t Pay My Taxes by April 15?
Filing and paying are two separate things, and the penalties associated are very different.
Failure-to-File Penalty
5% of your unpaid balance per month, up to 25% of the total owed. This is the one to avoid at all costs. It kicks in the moment you miss the filing deadline without an extension.
Failure-to-Pay Penalty
0.5% per month on the unpaid balance and the failure-to-pay penalty will not exceed 25% of your unpaid taxes. This is ten times smaller than the failure-to-file penalty. If you file on time but just can’t pay, this is all you’re dealing with — plus interest.
Additional Note
If both a failure to pay and a failure to file penalty are applied in the same month, the failure to file penalty will be reduced by the amount of the failure to pay penalty applied in that month. For example, instead of a 5% failure to file penalty for the month, we would apply a 4.5% failure to file penalty and a 0.5% failure to pay penalty.
Interest
The IRS charges interest on unpaid balances starting April 16, compounded daily. Rates are set quarterly (currently 6% for Q2 2026) and will continue to accrue until the balance is paid in full.
All of this said, always file on time even with a $0 payment attached.
What Are My Options If I Can’t Pay in Full?
Pay What You Can Now
Send whatever you can with your return. Penalties and interest only accrue on the remaining unpaid balance, so even a partial payment reduces what compounds against you going forward.
Short-Term Payment Plan (180 Days)
- Available if you owe under $100,000 (in combined tax, penalties, and interest)
- No setup fee
- Apply at IRS.gov
- Penalties and interest still accrue, but no formal installment agreement required
- Best option if you expect to have the full balance within six months
Long-Term Installment Agreement
- Available if you owe under $50,000 (in combined tax, penalties, and interest) and filed all required returns.
- Setup fees range from $0–$178 depending on how you apply and your income level
- Penalties drop to 0.25% per month once an installment agreement is in place (down from 0.5%)
- Apply online through the IRS Online Payment Agreement tool
Currently Not Collectible (CNC) Status
If you have no ability to pay and covering basic living expenses is already a stretch, you can request CNC status. The IRS temporarily suspends collection activity. The debt doesn’t go away, but enforcement stops while your financial situation is evaluated. You’ll need to provide financial documentation.
Offer in Compromise (OIC)
This lets certain taxpayers settle their debt for less than the full amount owed. Qualification is strict, as the IRS considers your income, expenses, asset equity, and ability to pay. The application process takes months, and you must be current on all filings to apply. It’s not a quick fix, but it’s a legitimate path for taxpayers with serious, long-term financial hardship. Use your Individual Online Account to see if you qualify.
Does Filing an Extension Help If I Can’t Pay?
No, and this is one of the most expensive misconceptions in tax filing.
An extension gives you until October 15 to file. Your payment is still due April 15. If you owe money and don’t pay by the original deadline, failure-to-pay penalties and interest start accruing April 16 regardless of whether you filed Form 4868.
When an extension still makes sense: If you don’t yet know what you owe, file the extension, estimate your liability conservatively, and send a payment with it. That payment doesn’t have to be exact, it just needs to be close enough to minimize what accrues.
Should I Put My Tax Bill on a Credit Card or Take a Loan?
Sometimes yes. If your credit card APR or personal loan interest rate is lower than what the IRS charges, it may be cheaper to pay the IRS in full using borrowed money and then repay the lender on your own terms. You also avoid the IRS installment agreement setup fee and ongoing compliance requirements.
The IRS accepts credit cards through third-party processors. Each charges a processing fee of around 1.75-1.98%, so make sure to factor that in before deciding.
What Not to Do
- Don’t skip filing because you can’t pay: This is the single most expensive mistake. The failure-to-file penalty dwarfs the failure-to-pay penalty.
- Don’t ignore IRS notices: If you’ve already missed deadlines or received a notice, respond promptly. Silence escalates enforcement.
- Don’t assume you won’t qualify for a payment plan: Most people do. The IRS processes millions of installment agreements every year.
- Don’t raid your retirement account without understanding the cost: Early withdrawal from a 401(k) or IRA triggers income tax plus a 10% penalty, you could end up owing even more.
Your Action Plan Right Now
- File your return by April 15, even if you’re sending $0
- Pay as much as you can with the return
- Apply for a payment plan immediately at IRS.gov
- If you’re unsure what you owe or your situation is complicated, talk to a tax professional before the deadline… not after
JBS is a top-rated accounting firm in the Merrimack Valley serving individuals and small business owners across the country. If you’re facing a balance you can’t cover, our team can help you understand your options and communicate with the IRS on your behalf. There’s still time to act now.
Book a tax appointment with JBS Corp today!
Note: Tax rules, penalty rates, and IRS program thresholds change periodically. The information in this article reflects our best knowledge at the time of publication but may not reflect the most current figures. Always visit IRS.gov or consult a tax professional for the most up-to-date guidance.
