When Do You Have to Pay Taxes If You Owe?
Understand your tax payment responsibilities and options when you owe. Learn crucial timelines and the financial implications of not paying on time.
Understanding tax payment obligations and available solutions is important when facing a tax liability. Various options exist to help manage the situation and meet federal requirements, helping taxpayers navigate their financial responsibilities.
The Primary Tax Deadline
The federal tax filing and payment deadline for most individual taxpayers is typically April 15th each year. This date applies to income tax owed for the previous calendar year; for instance, taxes for the 2024 tax year are generally due by April 15, 2025. This date shifts to the next business day if April 15th falls on a weekend or legal holiday. Certain situations, such as a federally declared disaster or living outside the country, can provide an automatic extension to file and pay. However, interest still accrues on payments made after the original due date.
Options When You Cannot Pay in Full
If you cannot pay your full tax liability by the April 15th deadline, the Internal Revenue Service (IRS) offers several options. Each option has specific requirements and implications.
Filing an extension with Form 4868, “Application for Automatic Extension of Time to File U.S. Individual Income Tax Return,” grants an automatic six-month extension to file your federal tax return, typically until October 15th. This extension applies only to filing, not to paying any taxes owed. Payment of your estimated tax liability is still expected by the original April 15th deadline to avoid penalties and interest.
A short-term payment plan allows up to 180 additional days to pay your tax liability in full. This option is generally available if your combined balance of tax, penalties, and interest is less than $100,000. While there is no setup fee, interest and penalties continue to accrue on the unpaid balance.
An installment agreement allows monthly payments for up to 72 months (six years). You can qualify if your combined tax, penalties, and interest are less than $50,000. Apply through the IRS Online Payment Agreement tool, by mail using Form 9465, or by phone.
An Offer in Compromise (OIC) is an option where you propose to settle your tax debt for a lower amount than what you owe. The IRS considers your ability to pay, income, expenses, and asset equity when evaluating an OIC. To be eligible, you must have filed all required tax returns, made all necessary estimated payments, and not be in an open bankruptcy proceeding.
Understanding Penalties and Interest
Not paying your taxes on time can result in financial consequences from the IRS. These charges are designed to encourage timely compliance with tax obligations.
The failure to pay penalty is typically 0.5% of the unpaid taxes for each month or part of a month the tax remains unpaid. This penalty can accumulate up to a maximum of 25% of your unpaid taxes. If you enter an approved installment agreement, this penalty may be reduced to 0.25% per month during the agreement’s duration.
Interest is also charged on underpayments and any unpaid taxes, starting from the original due date until the balance is fully paid. The interest rate is determined quarterly and compounded daily. For individuals, the underpayment interest rate for the second quarter of 2025 is 7% per year.