What Happens If You Owe The IRS Money And Don’t Pay?

The vast majority who record their taxes, subsequently get their cash back in the form of a refund. However, that does not generally occur. In the event that your profit expanded a ton yet you never balanced your retention, you could have an underpayment on your hands, which implies you owe the IRS cash, and soon. You are needed to take care of your assessment tab by the filing deadline.

This is what happens if you owe the IRS money and don’t pay them on schedule: You may come face to face with IRS punishments and interest. Regardless of whether you can’t pay by tax day, even then you should record your return or if nothing else, at least apply for a six month extension. At that point, survey your alternatives for how you can pay the IRS for what you owe.

In this article, we plot the outcomes of not filing or paying on schedule, along with what you can do if you owe the IRS.

What Happens If You Owe The IRS Money And Don’t Pay?

One thing that seems to be a common question is: what happens if you owe the IRS money and don’t pay? You may be wondering if it is important to file your return if you can’t afford your tax bill. However, one essential thing is that you should file your tax return or an extension to prevent the failure to file penalty. The penalty you can  receive is equivalent to 5% of the unpaid dues, each month or for a part of each month, up to a maximum of 25% of unpaid tax dues.

Regardless of whether you owe back taxes or current taxes, if you do not pay then you can be struck with a large number of penalties and interest accruals over the passage of time. If you are unable to pay, the penalty starts at 0.5% of your balance due per month (capped at 25% of the back taxes you owe). As of May 2019, the interest rate for underpayment of taxes is 6%, but it can change quarterly.

What If I Owe Taxes And Can’t Pay?

It is important to understand your options. This will assist you to determine what to do if you owe the IRS and you can come up with a suitable plan. Here are some of the most common options for people who owe taxes and can’t pay.

1. Set up an installment agreement with the IRS.

Citizens who are taxpayers can set up IRS installment plans, called installment agreements. The kind of arrangement you can get relies upon your circumstance, including the amount you owe and how soon you can pay that remaining sum. You should not settle on an installment plan in the event that you can pay the balance in 120 days. For online installment arrangements, the application expense is $149, or $31 if installments are made electronically. For citizens who have a low salary, the fee is $43. To apply for a low salary application fee, you would have to submit Form 13844.


You would have to complete an online payment agreement or Form 9465. However, a financial statement for installment agreements of $50,000 or less is not required. Another thing you can do that can prove to be helpful is to get an expert to assess your situation and figure out the best solution for you.

On the off chance that you settle on an installment agreement, the punishment on your unpaid amount diminishes to 0.25% every month, until you pay the full sum on time. Interest is charged at the transient federal rate in addition to 3% (interest can change each quarter). By and large, the IRS can void arrangements if you do not pay on time. If the amount you owe is more than $50,000, you would have to fill Form 433-A or Form 433-F. You can also pay through payroll deductions. For this, you would have to fill Form 2159 which is the Payroll Deduction Agreement.

2. Request a short-term extension to pay the full balance.

The IRS will give as long as 120 days to citizens to pay their complete tax balance. There is no expense to demand the extension. It is absolutely free of cost. There is a punishment of 0.5% every month on the unpaid amount. As mentioned earlier, you can complete an online installment arrangement, call the IRS at (800) 829-1040 or get an expert to deal with it for you. This is helpful for citizens who need a brief time to take care of their complete tax bill. The IRS will charge interest at the transient government rate in addition to 3% more (interest can change each quarter). With brief extensions, you dodge the installment payment application charge However, you cannot avoid late installment punishments and interest.

3. Apply for a hardship extension to pay taxes.

The IRS offers choices for individuals in difficult circumstances, including at present not collectible status and the proposal for bargain. For an extension dependent on difficult situations, you will qualify only in the event that you can demonstrate that paying the expense you owe would cause monetary difficulties, in light of IRS financial norms. You do not have to pay any fee to apply for a hardship extension. Although there are no punishments, interest is still determined at the short term federal rate in addition to 3% more (interest can change each quarter). In order to apply for extension, you can fill the IRS Form 1127, which is the Application for Extension of Time for Payment of Tax Due to Undue Hardship form. You should incorporate a statement of your benefits and liabilities.

4. Get a personal loan.

You can get in touch with a close family or friend and ask them to loan you the money. Private online lenders are another easy source for taking out a personal loan. Based on the source, your fee and cost can vary greatly. This option can prove to be cheaper for you, but at the end of the day, it is better to use your own better judgment.

5. Borrow from your 401(k).

On the off chance that your 401(k) plan considers this kind of credit, you are typically restricted to 50%, with $50,000 being the maximum and you should reimburse the cash within five years. There is also a potential minimal charge. On top of that, the installment plan you choose for yourself should likewise charge interest. Check with your arrangement head for subtleties. In the event that it is permitted, a loan from your 401(k) plan can be prepared, a reasonable wellspring of money to pay the current or back taxes you owe. Be that as it may, taking an advance (loan) could contrarily affect your future retirement reserve funds in the event that you do not repay it. The credit is treated as a taxable dispersion in the event that you do not make opportune installments, leave your corporation without reimbursing the loan, or your arrangement ends. Additionally, on the off chance that you are not yet aged 59½, an taxable circulation is dependent upon the 10% early dissemination punishment.

6. Use a debit/credit card.

There are various different service providers that are accessible for this alternative. The variations are by and large about $2.49 to $3.95 on a debit card or 1.87% to 2.35% of the tax money owed on credit cards. Check with the IRS for a rundown of service providers. This sort of installment is advantageous and gives citizens more prominent control and adaptability for making installments. They may likewise acquire focuses, miles, or other credit card rewards. In any case, higher credit card dues could contrarily affect your credit score, and paying with credit may not be proper for individuals with unmanageable credit card obligations.

What Happens If I Owe More Taxes Than I Can Pay?

It is alright if you can’t pay your taxes. Each year, almost 5 million taxpayers need an alternative method of  payment. This leaves them questioning what happens if they pay their taxes late or if they owe more than what they can pay. Apart from the options given above, here are some more alternatives you can consider if you owe more taxes than what you can pay:

Currently Not Collectible

One instance where the IRS will not ask you to pay is if you are in a difficult situation financially, which means that you are not able to pay the IRS. However, you have to provide evidence for your situation and once your circumstances are better and more stable, you would have to pay those remaining dues. Therefore, if you cannot pay your taxes, you can put a hold on them until you are in a financially better position to be able to pay.

Offer In Compromise (OIC)

This is a settlement of the taxes that you still have not paid, for less than the sum you owe. This is only the case if you qualify for it. Citizens normally utilize an OIC when they have limited or no advantages and experience difficulty paying their fundamental everyday costs.

If You Owe Taxes How Long Do You Have To Pay?

In order to pay your entire tax balance, the IRS provides taxpayers with up to 120 days. However, if these days are still not enough time for you to pay your remaining tax expenses, then you can always file for an extension.

What To Do If You Owe The IRS A Lot Of Money?

It is natural for you to feel anxious and stressed out about your taxes, especially now when the future is so uncertain. Other than the numerous other options given in this article, here are a few other tips and tricks that might help you if you the IRS a lot of money:

File Your Tax Returns

These plans and arrangements necessitate that you have documented all necessary tax forms. Furthermore, the IRS may document a tax lien to ensure its interest.

Pay Your Estimated Tax Payments

It might be enticing to attempt to utilize current assets to free yourself from tax liabilities and obligations made a year ago. In any case, utilizing that cash to pay 2019 expenses may simply develop the gap you are in for 2020. The best thing you can do is quit digging. Give a valiant effort to manage the current year first, and afterward resolve past years obligations as well as can be expected.

Sign Up For An Online Tax Account

On the off chance that you have not pursued an online account with the IRS, it is recommended that you register and sign up for it immediately. You can utilize the device to see your result sum, survey the parities for each tax year you owe, look into your installment history and view your present installments. You can likewise choose electronic payment choices and receive transcripts (inclusive of account and wage and salary records).

Review Your Return

Your tax return is likely the exact opposite thing you need to take a gander at the present moment, yet with the subtleties and details still fresh in your brain, it is really the ideal opportunity for an audit. Why is this? To begin with, you can make mistakes. Everyone, including proficient tax preparers, can make mistakes. What’s more, even with the best tax arrangement programming, anybody can in any case translate a few numbers or neglect to enter some altogether. Second, you can begin getting ready for the next year. You can make use of last year’s expense form as a manual for the kinds of derivations you will have to follow this year


Can The IRS Take Your Refund If You Owe Them Money?

The answer to this is yes. At the point when the IRS takes or holds your discount, it’s an indication that you are not on favorable terms with our country’s tax collector. The IRS can take or hold your refund in any of the following circumstances:

  • You owe back taxes.
  • The IRS is questioning the accuracy of your tax return.
  • You have either one or more back tax returns that are not filed.
  • There is a problem with your tax account at the IRS.
  • You owe other obligations, like state taxes, student loans, back child support, or remaining unemployment compensation repayments.

At the point when the IRS takes or holds your refund, it is essential to investigate your IRS account. There could be numerous potential causes when your refund does not appear true to form. Exploring your IRS record will assist you with getting to the root cause of the issue and clear up any disarray with the IRS.

A tax expert can do this for you by managing the IRS. Your tax professional can meet up with the IRS and survey your duty account records to get your total expense history. With this data, your tax expert will know precisely what is happening, and how to get back on favorable terms with the IRS to stay away from future refund issues. Find support from a trustworthy and authentic IRS expert.


If you ever find yourself in a sticky situation with the IRS, do not panic. In the event that you can’t pay the entire amount of the expenses you owe, you should in any case document your return by the cutoff time and pay as much as possible to stay away from punishments and interests. You likewise should contact the IRS to talk about your installment alternatives at 800-829-1040. The organization might have the option to give some help, for example, a momentary extension to pay, an installment agreement or a proposal in a bargain, or by incidentally postponing tax collection by announcing your record is as of now not collectible until you can pay. Now and again, the organization might have the option to waive off penalties. Notwithstanding, the office can’t defer interest charges which collect on unpaid tax bills.

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