The deadline for filing your 2024 tax return is April 15, 2025. But what if you owe the IRS money and you don’t have the cash to pay up?
If you don’t pay, you’ll be charged penalties and interest. However, taking a few steps now could help you avoid some fees and remain in good standing with the IRS. That begins with filing your tax return on time even if you don’t have the money to pay what you owe. (See five ways to file your taxes for free.)
While the IRS charges a failure-to-pay penalty of 0.5 percent per month on your unpaid balance, the penalty for failure to file your tax return is much larger: a whopping 5 percent per month (up to 25 percent) on the unpaid balance. So, even if you can’t pay right away, it’s still important to go ahead and file your tax return.
“Don’t ignore it and don’t put it off because ‘I just don’t have the money,’” says Mark Steber, chief tax information officer at Jackson Hewitt.
“Ignoring your taxes because of a balance due situation is the No. 1 mistake I see taxpayers make,” he says, “because it automatically starts the clock on monies that you’re going to pay to clean this up — and you’re eventually going to have to clean it up.”
Remember it’s not only the feds who will be watching. The IRS shares information with the states when taxpayers are delinquent, Steber says. If you ignore payment of both federal and state taxes, “you’re going to have not one problem, but generally two problems.”
Here are four actions you can take today if you can’t pay what you owe to the IRS.
1. Ask for a hardship extension
If you can prove that paying your taxes would be a serious burden, the IRS might give you extra time to pay.
“You can apply for a financial hardship extension for up to six months,” Steber says. There are a host of reasons you might have for needing the extra time, such as a death in the family, illness or fire. “You have to explain it, and you have to prove it in many cases,” he says.
You can request a payment extension by submitting IRS Form 1127.
Requesting a hardship extension for your tax bill is different than requesting extra time to file your tax return. The automatic extension that many taxpayers request so they can delay filing their return for six months allows a delay only in submitting your tax return — you’re still expected to pay any taxes due by April 15. (File Form 4868 to request an automatic extension of time to file your tax return.)
When you submit Form 1127 for a hardship extension for your tax liability, you must explain why paying your taxes on time would cause undue hardship. The IRS says that simply being inconvenienced isn’t enough to qualify for an extension on the payment deadline. You must prove that paying on time would cause a significant financial loss, such as being forced to sell a property for below-market value.
You’ll need to submit a statement detailing your assets and liabilities as well as an itemized list of income and expenses. But if you can make your case, you could save a lot of money. While you’ll still need to pay interest on the amount you owe, you’ll get extra time to pay before the IRS starts imposing penalties.
When you submit your request for a hardship extension, you can specify how much extra time you need to pay your taxes (though extensions of more than six months usually aren’t granted).
2. Enter into a payment plan with the IRS
If you can’t get a payment extension, the IRS might offer help in the form of a payment plan. These plans include:
- A short-term plan lasting up to 180 days. There are no fees to set up this plan, but you’ll incur penalties and interest until the balance is paid in full. You can make payments via check, money order, debit or credit card, or automatic withdrawals from your bank account. Extra fees might apply if you pay by card.
- Installment agreements lasting more than 180 days, with payments made through automatic withdrawals. This plan costs $22 to set up if you apply online or $107 if you apply by phone, mail or in person. (Qualifying low-income taxpayers can have the fee waived.) The IRS will establish a minimum monthly payment based on what you owe, including fees and interest, with automatic withdrawals from your checking account.
- Installment agreements lasting more than 180 days, without an autopay option. There’s a $69 setup fee if you apply online or a $178 setup fee for in-person, mail and phone applications. (Low-income applicants can pay a reduced $43 setup fee for any method, which can be reimbursed if certain conditions are met.) Minimum monthly payments are calculated based on outstanding tax debt, with fees and interest tacked on.
Not everyone is eligible for payment plans. “You must be up to date on your taxes before the IRS will be willing to consider a repayment plan,” says Joshua Zimmelman, president of Westwood Tax & Consulting LLC. “If you haven’t filed all of your past returns, this isn’t an option for you, and you’ll have to finish that first before they’re willing to work with you.”
Even if you meet the qualifying criteria, however, don’t assume a payment plan is the best choice. There are pros and cons to consider.
“The biggest advantage to entering into an installment agreement is that it suspends collection activity,” says Matthew T. Eyet, a tax lawyer and partner with Habba Madaio & Associates LLP. “So long as a taxpayer has an installment agreement in place, the IRS is prohibited from garnishing the taxpayer’s wages and levying the taxpayer’s bank and retirement accounts.”
Penalties and interest continue to accrue, even while your payment plan is in place, Eyet said. However, for the months during which the agreement is in effect, the IRS’ standard 0.5 percent failure-to-pay monthly penalty is reduced to 0.25 percent.
You’ll want to be sure you can afford the minimum payments the IRS requests. If you can’t, you’ll need to provide a financial statement to substantiate a lower amount, says tax professional and enrolled agent LuSundra G. Everett. “As with any debt, you want to remain current with your payment arrangements,” she says. “Otherwise, the IRS can cancel your payment plan and demand the entire amount due immediately.”
To make repayment a little easier, Everett suggests increasing your withholding next year so you’ll end up with a tax refund you can apply to your outstanding debt.
3. Pay your taxes using a credit card
IRS payment plans aren’t your only choice.
“You might consider paying with a credit card,” Zimmelman says. “Even though you’ll end up paying interest charges on your credit card balance, depending on your rate, that might still be cheaper than paying the IRS’ fines and interest charges.”
On top of the failure-to-pay penalty of 0.5 percent per month, the IRS charges interest of 3 percent plus the federal funds rate. For example, for the first quarter of 2025, the IRS charged a 7 percent rate on unpaid tax bills. The interest compounds daily. (See this IRS page for more on interest charges, and this IRS page for current interest rates.)
That means paying with a credit card could be the most cost-effective option if you have a low-interest credit card or a card offering a 0 percent introductory interest rate.
Don’t forget to factor in the processing fees associated with paying taxes with a card. The good news is that IRS credit card payment processing fees have come down over recent years, making paying this way more attractive than in the past, Zimmelman says. As of February 2025, the processing fees for using a credit card to pay taxes were as low as 1.75 percent.
Learn more on how to pay by credit card on the IRS website.
4. Take out a personal loan
Personal loans are offered by banks, credit unions and online lenders. Each lender sets its own qualifying requirements, range of interest rates and loan terms. You often can borrow money with a personal loan for a cost that’s less than carrying a balance on a credit card.
Unlike credit cards, which don’t have a set repayment schedule, personal loans typically must be repaid over a designated period of time. These loans generally have multiyear repayment terms, making them a good option for repaying a large tax debt.
Some lenders offer personal loans without charging an origination fee, but interest rates vary and will be determined by your credit score and income. Comparison shop among lenders to find out how much it will cost you to borrow money and whether monthly payments will be affordable.
You can find different lenders in Bankrate’s personal loan marketplace and get prequalified before going through the full application process.
Whatever you do, file your taxes on time
Whichever payment option you choose, there’s one thing you absolutely should do: Submit your tax forms to the IRS on time.
“One of the biggest mistakes taxpayers make is the conscious decision to not file a tax return because of a lack of funds,” Eyet says. “Under the federal tax code — and nearly every state tax code — the penalties for not filing the return are far more severe than the penalties for not paying.”
The failure-to-pay penalty is 0.5 percent per month, while the failure-to-file penalty is 5 percent per month.
Ignoring your taxes is a “self-inflicted financial wound,” adds Steber, of Jackson Hewitt. “The penalties, the interest, the fees to clean it up often are multiple of what the tax liability was at the beginning if you had just done the right thing,” he says.
“The IRS will take your savings account, they will take your retirement, they will garnish your wages, they will take your future refunds till they get repaid,” he says.
So do your future self a favor and file by the deadline, even if you can’t pay right away. Then come up with a payment plan.
The “bottom line,” Eyet says, “is it’s almost always best to file on time and deal with any unpaid liability later.”
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