What Happens if You Can’t Pay Your Tax Bill on Time?

Paying taxes can be a daunting task, especially if you find yourself unable to pay your tax bill by the deadline. However, it's crucial to understand the implications and the steps you can take to manage the situation.

Immediate Penalties and Interest

If you can't pay your tax bill on time, the IRS imposes penalties and interest on the unpaid amount. The failure-to-pay penalty is 0.5% of your unpaid taxes for each month or part of a month the tax is unpaid, up to 25% of the unpaid amount. Additionally, the IRS charges interest on the unpaid taxes, which compounds daily until the bill is paid in full [source: IRS](https://www.irs.gov/taxtopics/tc653).

Filing On Time

Even if you can't pay your tax bill, it's important to file your tax return on time or request an extension. The failure-to-file penalty is much steeper than the failure-to-pay penalty, at 5% of the unpaid taxes for each month or part of a month your return is late, up to 25%. By filing on time, you avoid this additional penalty and demonstrate your willingness to comply with tax laws.

Payment Options

The IRS offers several payment options to help taxpayers manage their bills. One option is to set up an instalment agreement, which allows you to pay off your tax debt over time in monthly payments. To apply, you can use the IRS Online Payment Agreement tool or submit Form 9465, Installment Agreement Request

If you can't pay the full amount immediately but can make partial payments, you may qualify for a short-term payment plan, typically lasting up to 120 days. Another option is an Offer in Compromise (OIC), where the IRS agrees to settle your tax debt for less than the full amount owed if you meet specific criteria and demonstrate an inability to pay the full amount.

Moving Forward

Not being able to pay your tax bill on time can be stressful, but it's important to stay proactive. If your tax situation is complex or overwhelming, contact us for guidance regarding the best resolution for your circumstances. We provide tailor-made taxation-related solutions for you, helping you understand your options and take all the necessary steps for a stress-free tax journey! 

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