Updated June 17, 2026
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Open the calculatorIf you cannot pay your federal taxes in full by the due date, the most important step is to file your return on time anyway, even without payment. Failure to file carries its own penalty on top of the failure-to-pay penalty, so filing without payment is considerably better than not filing at all. From there, the IRS offers a range of options depending on how much you owe and your financial situation.
The First Move Matters More Than the Balance
File on time anyway. The failure-to-file penalty runs separately from, and on top of, the failure-to-pay penalty, so a filed-but-unpaid return costs far less than an unfiled one. Once the return is in, your options depend on the balance and your finances: a short-term extension, a long-term installment agreement, Currently Not Collectible status if you cannot pay anything right now, an Offer in Compromise if the debt is genuinely uncollectible, or penalty abatement if your compliance history is otherwise clean. The steps below walk through each in order, starting with what to do today.
Step One: File Your Return, Even Without Full Payment
Many taxpayers skip filing because they cannot pay. That decision compounds the problem. The failure-to-file penalty is generally 5 percent of unpaid taxes per month, capped at 25 percent. The failure-to-pay penalty is 0.5 percent per month. Filing on time, even without a payment, eliminates the larger of those two penalties. If you need more time to file, request an automatic six-month extension using Form 4868. An extension to file is not an extension to pay: interest and penalties on any unpaid balance continue accruing from the original due date.
Step Two: Pay What You Can Now
Even a partial payment reduces the balance on which interest and penalties accumulate. You can make a payment immediately through the IRS payments portal, which accepts direct bank transfers via Direct Pay at no cost, plus debit and credit card payments through third-party processors (processing fees apply). Paying something is nearly always better than paying nothing.
Step Three: Consider a Short-Term Payment Extension
If you can reasonably pay the full balance within 180 days, a short-term payment extension may be the simplest fix. There is no setup fee, and you avoid the ongoing compliance requirements of a formal installment agreement. You can apply online through the IRS Online Payment Agreement application in minutes if you owe less than $100,000 in combined tax, penalties, and interest.
Step Four: Set Up an Installment Agreement
If you need more than 180 days, a long-term installment agreement lets you pay in monthly installments. Most individuals who owe $50,000 or less can set one up online with minimal paperwork. The IRS generally does not require detailed financial disclosure for streamlined plans. Use our free IRS payment plan calculator to see what a realistic monthly payment looks like before you apply.
For balances above $50,000, the IRS may ask for a Collection Information Statement (Form 433-F or 433-A) documenting your income, expenses, and assets. The repayment term and monthly amount are negotiated from there based on your financial capacity.
Step Five: Request Currently Not Collectible Status
If paying anything right now would prevent you from covering basic living expenses such as food, housing, and utilities, you may qualify for currently-not-collectible (CNC) status. When the IRS grants CNC, it temporarily suspends collection actions. Your balance does not disappear, and interest continues to accrue, but the IRS will not pursue liens, levies, or garnishments while you are in this status. You will need to provide financial information to qualify, and the IRS reviews CNC status periodically.
Step Six: Explore an Offer in Compromise
If your long-term financial picture makes it unlikely you will ever pay the full balance, an Offer in Compromise (OIC) lets you propose a lower settlement amount. The IRS accepts OICs when the offer represents the most it can reasonably expect to collect. This is not a simple or guaranteed option: acceptance rates vary and the process requires detailed financial disclosure. See our article on IRS Offer in Compromise eligibility for a full walkthrough. You can also run a quick check with the free IRS OIC Pre-Qualifier Tool.
Step Seven: Request Penalty Abatement
If this is your first penalty, or if you have a solid compliance history but missed a payment due to a specific hardship such as a serious illness or natural disaster, you may qualify for first-time penalty abatement or reasonable-cause penalty relief. This does not eliminate the underlying tax or interest, but it can reduce your total balance by a meaningful amount. You can request it by phone or in writing after your balance is paid or alongside an installment agreement request.
Beware of Tax Relief Scams
Financial pressure makes people easy to sell to. Predatory tax-relief companies know this and spend heavily on late-night TV spots and search ads targeting people who just opened a CP2000 notice. Many charge thousands of dollars upfront and deliver a result you could have reached yourself for a $31 setup fee online. Watch for:
- Guarantees of specific settlement amounts before reviewing your financial records
- Large upfront fees before any work is done
- Claims of special insider access to IRS programs (there is no such access)
- Pressure to act immediately or the offer expires
The free Taxpayer Advocate Service is an independent office within the IRS that helps taxpayers resolve problems at no cost. Low Income Taxpayer Clinics provide free or reduced-fee representation for qualifying individuals. Both are available without sending money to a company that found you through a Google ad.
When to Consult a Tax Professional
Straightforward situations, such as a streamlined installment agreement on a balance under $50,000, can usually be handled directly with the IRS using free online tools. More involved situations, including large balances, unfiled returns for multiple years, payroll tax issues, or OIC applications, may benefit from a licensed CPA, enrolled agent, or tax attorney. If you hire help, verify credentials through the IRS Directory of Federal Tax Return Preparers and confirm the professional is in good standing with their licensing body.
Act Quickly to Limit Penalties and Interest
Every day a tax balance sits unaddressed, interest compounds daily and the failure-to-pay penalty adds another 0.5 percent per month. Ignoring IRS notices does not pause that clock. The agency works considerably better with taxpayers who call proactively than with those who go quiet. If you have received a notice, read the entire thing and note the response deadline before doing anything else.
The IRS has had this conversation with a lot of people. File on time, pay what you can, contact the agency or the Taxpayer Advocate Service, and bring in a licensed professional if your situation involves multiple unfiled years, payroll taxes, or a balance that makes a standard installment agreement unworkable. The options narrow the longer you wait.
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