- Community
- Topics
You might have even planned ahead and had taxes withheld or paid quarterly estimates. Yet your new money flow put you into a higher tax bracket and you simply didn’t pay enough to cover it. You guessed it - that tax filing surprise can come in the form of a larger tax liability, and often a balance due. It’s frustrating for sure. Whatever the reason you owe, you have options to pay your balance due…or even negotiate with the IRS if you truly are in a financial hardship.
Keep in mind that you must first file your tax return in order to use any of the options below.
- Simple Payment Plan - The Simple Payment Plan is a fairly new option as of March, 2025 and most people will qualify for it. You must owe less than $50,000 (including fees, penalties, and interest). And you must be current on your tax return filings. This is the easiest of the plans to set up and most taxpayers won’t even have to prove their financial situation. Also, you might have up to 10 years to pay off your tax debt. Keep in mind that penalties and interest will continue to accrue until it’s paid in full.
- Short-term payment plan - If you can pay your balance due within 6 months (180 days) this option might be for you. Typically, there are no fees to apply for a short-term payment plan, but penalties and interest will continue to accrue until it’s paid off. And you must owe less than $100,000.
- Long-term payment plan - If you need more than a few months to pay and don’t qualify for the Simple Payment Plan, you can apply for a long-term payment plan. You might have heard this referred to as an Installment Agreement; and you’ll need to come up with an amount you’ll be able to pay each month. This one comes with a fee to set up which varies depending on if you’re low income and how you set up your plan (online or with a real human). You can make your monthly payments by check, bank account or credit/debit card (fee applies). Interest and penalties continue to accrue until it’s paid in full.
- Offer in Compromise (OIC) - If none of the above options work for you because you have a change in your financial situation or are experiencing some type of severe financial hardship beyond your control, you might look into an Offer In Compromise (OIC). The IRS will consider your ability to pay based on your sources of income, expenses and assets. You must be current on all tax payment requirements as well as tax return filings. There’s a fee unless you meet specific low-income guidelines. If you qualify, the IRS may agree to a reduced tax bill.
Before deciding, you’ll want to check out these IRS FAQs with additional information on payment plans to make sure you qualify and know what to expect. And these FAQs specifically on the Offer In Compromise option.
PRO TIP: Often a balance due comes along with nasty underpayment penalties. Nobody wants to see that! You’ll be happy to know that if you’re in good standing with the IRS, you might qualify for IRS tax penalty abatement and relief. This is usually allowed if it’s your first-time requesting an abatement or for reasonable cause. Unfortunately, reasonable cause doesn’t include mistakes on your tax return, not knowing the tax law or even that you can’t afford it. You can always try though!
BONUS RESOURCES: