You apparently misunderstood how you could pay your federal taxes. There is no way to apply a state refund to taxes owed on a federal return. You can use direct pay: <a rel="nofollow" target="_blank" href="https://www.irs.gov/payments/direct-pay">https://www.irs.gov/payments/direct-pay</a>

Yes there will be a penalty and interest for late payment. The IRS will bill you for the amount of penalty and interest.

First you were looking at a summary page that netted out the fed balance due and the state refund ... at no time did the program say one would pay the other ... that was not an option in the FILE tab step 2.

And the IRS should already have a bill in the mail for the balance due + penalties + interest ... you can wait for the bill to make the payment   or   make the payment now and pay the penalties & interest bill when it comes in later.