What to Do If You Owe Taxes After Filing: Payment Options and Next Steps

AVM DeMars
May 4
4 min read

Man in a green shirt looks stressed, reading a document at a kitchen table. Sunlit room with fruit bowl and glass of water in the foreground.

You filed your tax return, and the number staring back at you is a lot bigger than you expected.

Before you flat-out ignore the sum or drain your savings in a panic, take a breath. As much as it may seem like a crisis, owing taxes means you have options—and the worst thing you can do is nothing.

Even if you can’t pay, the important thing is that you file on time. From there, you can work out a plan to settle up with the IRS.

In this blog, we’re looking at:

Steps to take if you owe taxes
Your options for paying them
How to handle penalties for late payment

What Happens If I Can’t Pay My Taxes?

Especially if you’re self-employed or tax-exempt, maybe you knew going into tax season that you’d have a bill at the end of the day. You just didn’t think it would be that high.

The thing is, by law, the IRS can hit you with penalties for failing to pay taxes by the deadline and not filing in the first place.

So even if you don’t know how you’ll settle your full balance, you should still file and pay what you can to avoid further fines.

Your IRS Payment Options

Once you have a balance with the IRS, there are several payment options you can use to pay it down.

Short-Term Payment Plans

A short-term tax payment plan applies when the total balance you owe is less than $100,000 in combined tax, penalties, and interest.

Time Limit: 180 days to pay the full balance
Best For: Those who can pay the full amount but need a bit more time to get the funds together.

You can set up this payment plan for free by applying on IRS.gov in just a few minutes.

Long-Term Payment Plan

A long-term payment plan applies to taxpayers whose total owed balance is less than $50,000 in combined tax, penalties, and interest.

Time Limit: You’ll pay an agreed-upon amount monthly until the collection statute expires, typically 10 years
Best For: Those who need more than six months to pay their balance

You can apply for a long-term plan using the Online Payment Agreement application. While it comes with a lower user fee than other methods, interests and penalties still accrue, so you should try to pay as much upfront as possible.

Offer in Compromise

An Offer in Compromise (OIC) allows you to settle your tax balance for less than you owe.

The IRS may approve this agreement if the amount you offer to pay is the most reasonable amount they can expect to collect within a given period.

They’ll base the OIC acceptance on their collectibility doubt—meaning your assets and income are less than the full tax liability amount—or if they determine collecting the full amount would create economic hardship for you.

Time Limit: Dependent on the agreement
Best For: Those who meet eligibility based on the IRS OIC Pre-Qualifier Tool

Currently Not Collectible

Currently Not Collectible means the IRS determines you cannot pay any of your tax due to financial hardship, so they temporarily delay collection.

You’ll have to fill out a Collection Information Statement (Form 433-F, Form 433-A, or Form 433-B, depending on your current income status).

Your debt isn’t erased in this case. You just get a bit more breathing room until you’re able to pay off your balance.

Regardless of your balance amount…

What About IRS Penalties?

If you have a good compliance history with the IRS, you may be eligible for “first-time abatement” and have your late filing and late payment penalties waived.

You may also be eligible for abatement if you meet qualifying circumstances, such as:

Illness
Natural disaster
Financial hardship

The important thing to know here is that while penalties can be reduced, the interest on your balance keeps running until it's fully paid off. Another reason to act fast.

Don’t Ignore an IRS Notice

Ignoring an IRS notice doesn’t make them go away. It only quickens the collection timelines and strips you of options and any potential good standing with the agency.

Plus, a federal balance may trigger state collection activities as well, so you don’t want to find yourself on the hook for both.

Always respond to a notice, even if it’s just to discuss a payment arrangement.

IMPORTANT: Don’t fall for scams. The IRS will never contact you via call, text, or social media for immediate payment. You’ll typically receive a letter or bill in the mail to notify you of a balance and explore payment options.

Facing a Tax Bill from the IRS or a State jurisdiction? AVM DeMars Can Help

Navigating payment options with the IRS can be complicated, especially if you’re opting for an Offer in Compromise or a delay in payment. A small mistake can mean you owe more than your original bill.

The tax advocates at AVM DeMars have successfully represented clients in tax audit matters before the IRS and state or local jurisdictions. When taxpayers find themselves in the potentially unfriendly circumstances of a tax examination, we help arrange Offers in Compromise, installment agreements, and more to ease the burden.