Woman at home looking at the bills and taxes.
- The tax extension deadline is Oct. 15, but you have options if you still can't pay your balance, experts say.
- You can apply for an IRS payment plan, or “installment agreement,” to pay your taxes owed over time.
- You will still incur interest and late-payment penalties, but an installment agreement could reduce the failure-to-pay penalty.
The tax extension deadline is Oct. 15, but you have options if you still can't pay your balance, experts say.
This year, the federal tax deadline was April 15. Those struggling to meet that due date could submit Form 4868 for a six-month extension to file.
But while the tax extension provided more time to file, 2023 taxes were due April 15. In the meantime, unpaid taxes continue to accrue IRS penalties and interest.
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"That's a surprise to a lot of people," said Josh Youngblood, an enrolled agent and owner of The Youngblood Group, a Dallas-based tax firm.
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If you missed the tax deadline, the late payment penalty is 0.5% of your unpaid balance per month or partial month, capped at 25%. You will also incur interest on unpaid taxes.
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By comparison, the failure-to-file penalty is 5% of unpaid taxes per month or partial month, up to 25%.
However, some taxpayers in disaster areas receive both an automatic extension to file and more time to pay.
File your return even if you can't pay
The IRS has options if you can't pay your taxes, "but you have to be current on your filing requirement," said Tom O'Saben, an enrolled agent and director of tax content and government relations at the National Association of Tax Professionals.
After filing, there are "various payment options" online, and many filers will receive an immediate acceptance or rejection of payment plan requests without calling, according to the IRS.
"If you owe less than $50,000, establishing a payment plan with the IRS is almost going to be automatic," O'Saben said.
IRS online payment plans, or "installment agreements," include:
- Short-term payment plan: This may be an option if you owe less than $100,000, including tax, penalties and interest. You have up to 180 days to pay in full.
- Long-term payment plan: This may be available if your balance is less than $50,000, including tax, penalties and interest. You must pay monthly, and you have up to 72 months to pay off the balance.
Although the late-payment penalty and interest will continue to accrue, an IRS payment plan could cut your late-payment fee in half while the agreement is in effect, according to the IRS.
One downside of IRS payment plans is future tax refunds could be used to offset your unpaid balance, O'Saben said.
'Don't ignore it'
If you have unpaid taxes, you can expect notices from the IRS, and communication with the agency is key, experts say.
"Don't ignore it because it won't go away," Youngblood said. "I've had clients come in, and they have a whole pile of unopened IRS letters."
"The IRS is not as bad as they think," he added. "They actually want to work with people."
