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

Many individuals owe taxes to the government rather than receiving a refund. Understanding payment deadlines and available options if you cannot pay in full is important. This guide clarifies how to manage your tax obligations when you owe.

The Standard Payment Deadline

For most individual taxpayers, the standard deadline to pay federal income taxes is April 15th of the year following the tax year. If April 15th falls on a weekend or holiday, the deadline shifts to the next business day. This due date applies whether you file your tax return or request an extension.

An extension to file your tax return, typically granted until October 15th, does not extend the time to pay your taxes. Any taxes owed are still due by the original April 15th deadline. Paying after this date can result in penalties and interest charges, even if you have an extension to file.

Exceptions to this standard payment deadline exist. Taxpayers in a federally declared disaster area may receive an automatic extension to both file and pay. Members of the military serving in a combat zone or qualified hazardous duty area often have an extended deadline. These exceptions are generally announced by the tax authority.

Consequences of Late or Non-Payment

Failing to pay your taxes by the due date results in financial penalties and interest charges. The Failure-to-Pay penalty is typically 0.5% of unpaid taxes for each month or part of a month, capped at 25% of your unpaid tax liability.

Interest is charged on underpayments, including any unpaid tax and penalties. The interest rate is determined quarterly and is generally the federal short-term rate plus 3 percentage points. Interest accrues daily from the payment due date until the balance is paid in full.

Persistent non-payment without communication or an agreed-upon arrangement can lead to more severe enforcement actions. These can include tax liens, which are claims against your property, or tax levies, which allow the government to seize property or assets to satisfy the debt. Addressing tax debts promptly is important to avoid escalation of penalties and potential enforcement.

Understanding Your Payment Options

If you cannot pay your taxes in full by the due date, several payment options are available:

Short-Term Payment Plan: This plan allows taxpayers up to 180 days to pay their tax liability in full. During this period, interest and penalties continue to accrue on the outstanding balance.
Installment Agreement (IA): This common arrangement allows taxpayers to make monthly payments for up to 72 months. While interest and penalties still apply to the unpaid balance, the Failure-to-Pay penalty rate may be reduced to 0.25% per month once an agreement is established.
Offer in Compromise (OIC): This option allows certain taxpayers to settle their tax liability with the tax authority for a lower amount than what is owed. It is generally considered when there is doubt as to collectibility, meaning the tax authority believes you cannot pay the full amount, or in rare cases, doubt as to liability or effective tax administration.
Currently Not Collectible (CNC) Status: In situations of extreme financial difficulty, a taxpayer’s account may be placed in this status. It temporarily delays collection efforts when the taxpayer demonstrates an inability to pay their living expenses and their tax debt. While in CNC status, collection efforts are suspended, but interest and penalties continue to accrue, and the tax authority may periodically review the taxpayer’s financial situation.

How to Establish a Payment Arrangement

Establishing a payment arrangement depends on the type of plan you wish to pursue and the amount you owe.

Short-Term Payment Plan

Taxpayers can request this online through the tax authority’s website or by calling them directly. This request is typically straightforward for balances below a certain threshold.

Installment Agreement

To set up an Installment Agreement, individuals can generally apply online using the tax authority’s Online Payment Agreement tool if they owe a combined total of under a certain amount, such as $50,000 in tax, penalties, and interest. For those who do not qualify for the online application or prefer to apply by mail, IRS Form 9465, Installment Agreement Request, can be submitted. The form requires basic information about the amount owed and your proposed monthly payment.

Offer in Compromise

The process for an Offer in Compromise requires submitting IRS Form 656, Offer in Compromise. This form must be accompanied by detailed financial statements. An application fee and an initial payment may also be required, depending on the offer terms.

Currently Not Collectible Status

To be considered for Currently Not Collectible status, taxpayers typically need to contact the tax authority directly by phone or in person. This process requires providing comprehensive financial information, including income, expenses, and assets, to demonstrate that paying the tax debt would prevent you from meeting basic living expenses. The tax authority reviews this information to determine eligibility for the temporary suspension of collection.

After Your Arrangement Is Set Up

Once a payment arrangement, such as an Installment Agreement, has been approved, maintaining adherence to its terms is important. Your primary obligation is to make all agreed-upon payments on time according to the established schedule. Missing payments can lead to the default of your agreement.

You must also ensure that you file all future tax returns on time. Any new taxes that become due in subsequent tax years must be paid in full by their respective due dates. Failure to meet these ongoing obligations can result in the termination of your payment arrangement.

If an agreement is terminated due to default, the full amount of your original tax debt, along with any accrued penalties and interest, may become immediately due. The tax authority could then resume collection actions, which might include issuing tax liens or levies. For certain arrangements, like Offers in Compromise or Currently Not Collectible status, the tax authority may periodically review your financial situation to ensure continued eligibility for the terms provided.