Just the Tip:
If you owe the IRS more than you can pay, file your return on time anyway. Filing late adds a penalty of 5% of the unpaid tax each month, while paying late adds 0.5%. Then apply online for an IRS payment plan and pay off the balance over time.
Say you’re a first-year freelancer who owes $5,000 you don’t have. Skip the return and the payment for five months, and penalties alone add $1,250, a quarter of the bill.
File on time and pay nothing, and the same five months cost $125. Filing is also a requirement for the bigger fixes. Both the online long-term plan and an offer in compromise require every return you owe to be on file. And once you ask for a plan, the IRS generally won’t take money from your paycheck or bank account while it’s under review or in effect. Your options, from simplest:
- A short-term plan gives you up to 180 days to pay in full, with no setup fee.
- A long-term plan, called an installment agreement, splits the balance into monthly payments. If you owe $50,000 or less, counting penalties and interest, you can apply online and get an answer right away, and automatic payments keep the setup fee at $29.
- An offer in compromise settles for less than you owe, but it’s for people who can’t pay in full even over time, and the IRS says to try every other option first.
A plan is a cash-flow tool, not a discount. Interest compounds daily, at 7% a year as of late 2026, and the late-payment penalty keeps running, cut to 0.25% a month on a long-term plan if you filed on time. All in, paying off that $5,000 over 12 months costs about $300.
Ignore the notices, and the IRS can file a public lien against your property, seize money from your paycheck or bank account through a levy, and keep your refunds. Skip the tax-relief companies that promise to settle for pennies on the dollar, too. They charge upfront fees that can run into the thousands for applications you can file yourself.
If an IRS notice is sitting unopened, open it today. Then pick the shortest plan whose payments you can keep up with, because every extra month adds interest and penalties.
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