I Paid My Taxes but Got a Bill From the IRS. What Should I Do?

Seeing a bill from the IRS after paying your taxes can be confusing and stressful. Whether due to a processing issue, an adjustment to your return, or unexpected penalties, understanding why you received the notice is the first step toward resolving it.

Before assuming there’s been a mistake, review the details carefully. Identifying the cause will help determine the best course of action.

Payment Misapplication

A common reason for an unexpected tax bill is a misapplied payment. This can occur if the IRS credits the payment to the wrong tax year, applies it to a different type of tax liability, or posts it under an incorrect taxpayer identification number. If this happens, the system may still show an outstanding balance despite your payment.

Estimated tax payments often cause issues. If a payment is recorded under the wrong quarter or tax period, the IRS may not recognize it as satisfying the intended liability. This is particularly common for self-employed individuals making quarterly estimated payments using Form 1040-ES.

Joint filers can also experience misapplication problems. If a payment is made under one spouse’s Social Security number but processed under the other spouse’s number, it may not be properly linked. Businesses using the Electronic Federal Tax Payment System (EFTPS) can face similar issues if they enter an incorrect Employer Identification Number (EIN) when submitting payroll tax deposits.

Potential Adjustments to the Return

The IRS may send a bill if it adjusts your tax return after processing due to discrepancies between what you reported and the data the agency has on file. If the IRS receives different income figures from employers, financial institutions, or other third parties, it may recalculate your tax liability, leading to an unexpected balance.

Unreported income is a frequent cause of adjustments. If you had freelance earnings, investment gains, or other taxable income that wasn’t included on your return, the IRS may identify the omission through its automated matching system. For example, if a brokerage reports capital gains on Form 1099-B but those figures don’t appear on your return, the IRS may adjust your taxable income and issue a bill for the difference, plus any applicable taxes.

Deductions and credits can also trigger changes. If the IRS determines that you claimed a deduction without sufficient documentation or exceeded allowable limits, it may disallow the amount, increasing your taxable income. This is particularly relevant for credits like the Earned Income Tax Credit (EITC) or Child Tax Credit, which have specific eligibility criteria. Errors, such as misreporting dependents or income thresholds, can lead to a reduced or removed credit and a higher tax bill.

Unexpected Penalties or Interest

Even if your tax return was correct and your payment was submitted on time, penalties and interest can still result in an IRS bill. Underpayment penalties occur when estimated tax payments or withholdings throughout the year were insufficient to cover your total tax liability. The IRS generally requires taxpayers to pay at least 90% of their current year’s tax or 100% of the prior year’s tax (110% for higher-income individuals) to avoid penalties. If your withholdings or estimated payments fell short, the IRS may assess an additional charge.

Late payment penalties further increase tax bills. If you owed taxes but didn’t pay the full amount by the original due date—typically April 15—the IRS charges a penalty of 0.5% of the unpaid amount per month, up to a maximum of 25%. Interest accrues separately and is compounded daily based on the federal short-term rate plus 3%. Even a small unpaid balance can grow significantly over time.

Filing an extension only grants additional time to submit your return, not to pay taxes owed. If you underestimated your tax liability when filing for an extension and underpaid, the IRS may assess interest on the outstanding balance from the original due date. If adjustments to your return increase your tax liability, the IRS will charge interest retroactively.

Verifying Account Details

Reviewing your IRS account transcript can clarify why you received a bill. The Account Transcript outlines tax return processing, payments, adjustments, penalties, and interest. This document can be accessed online through the IRS Get Transcript tool or requested by mail. Comparing the transcript with your records can help identify discrepancies between what you reported and how the IRS processed your return.

If your transcript shows an unexpected balance, check for any missing or delayed payments. Payments made close to the tax deadline, particularly those submitted by check, may take time to clear. The IRS generally processes electronic payments within 24 to 48 hours, but mailed checks can take weeks, especially during peak filing season. If a check has not been cashed, confirming whether it was lost or misrouted can prevent further complications.

Next Steps for Resolution

Once you’ve identified the reason for the IRS bill, taking the appropriate steps to resolve it is important to prevent further penalties or collection actions.

If you believe the IRS made an error, gather supporting documentation such as bank statements, payment confirmation numbers, or copies of tax forms. Contacting the IRS at the phone number listed on the notice can help clarify the situation, but be prepared for long wait times. For payment misapplications, providing proof of payment and requesting a payment trace through Form 3911 can help correct the issue. If an adjustment was made to your return, reviewing the IRS explanation and comparing it with your records can determine whether an appeal or amendment is necessary.

If the balance is valid but unaffordable, the IRS offers installment agreements that allow monthly payments over time. Short-term payment plans are available for balances under $100,000, while long-term installment agreements apply to amounts up to $50,000. If financial hardship prevents repayment, requesting a temporary delay in collection or applying for an Offer in Compromise may be options. In cases where penalties were assessed due to reasonable cause, such as a medical emergency or natural disaster, requesting penalty abatement through Form 843 could reduce the amount owed.