What to do if you owe the IRS this tax season: Tips and options if you can’t meet the April 15 deadline

Tuesday, April 15, 2025, is Tax Day in the United States, and the millions who have yet to submit their 2024 tax returns may wonder how much the IRS will charge them for failing to turn them in on time.

How to file a free extension

Some taxpayers may realize they owe the IRS but don’t have enough time to pay. While you can request a free filing extension for your 2024 tax return, this does not extend the deadline for paying any taxes owed. If you wait until the October 15 extension deadline to pay, penalties and interest will begin to accrue on the unpaid balance starting April 15.

However, if you anticipate being able to pay before October, requesting an extension can still be beneficial. By filing your return and making a payment as soon as possible, you can reduce the total fees and interest owed.

What fees does the IRS charge for failing to pay on time?

If taxpayers fail to pay their taxes on time, they will be charged a penalty of 0.5 percent of the unpaid taxes each month. This fee is known as the ‘failure-to-pay penalty’ and is charged “for each month, or part of a month, up to a maximum of 25%, of the amount of tax that remains unpaid from the due date of the return until the tax is paid in full.”

For individual taxpayers who file their return on time and have an approved installment agreement, the penalty is reduced to 0.25 percent during the agreement period.

Additionally, for 2025, if your return is more than 60 days late, you will face a “minimum penalty for late filing.” This penalty will be the lesser of $510 or 100% of the tax owed.

If you fail to pay for an extended period of time, leading the IRS to issue a notice of intent to levy or seize property, the penalty increases to 1 percent after 10 days of the notice being sent.

Getting a payment plan established

“If you are a qualified taxpayer or authorized representative (Power of Attorney) you can apply for a payment plan (including installment agreement) online to pay off your balance over time,” reports the US tax authority. To do so, you can visit this webpage, which takes you to the payment portal and will prompt those using it to establish a payment plan with the necessary tools.

There are two types of plans: short-term and long-term payment plans. The short-term plans can be paid off in 180 days or less and are eligible to those that “owe less than $100,000 in combined tax, penalties and interest,” while those established for the long-term determine a monthly payment that will be paid in installments until the debt is paid off completely. In order to set up a long-term payment plan, one must owe the IRS “$50,000 or less in combined tax, penalties and interest.”

Larger fees to be aware of

The penalty will continue to be charged until the tax is fully paid or until the maximum penalty of 25 percent is reached. In addition to the penalties, the IRS will start charging interest on any unpaid balance of taxes owed, which will accrue and compound daily from 15 April until the balance is paid in full.

The current interest rate for underpayments is 8 percent for corporate and non-corporate filers, calculated using the federal short-term rate plus three percentage points. Any outstanding penalties will also accrue interest while they remain outstanding, so you must complete your tax return on time.

What if I’m owed a refund? Will I still be penalized?

If you are owed a tax refund, there is no penalty for filing your return late. However, the longer you delay, the longer it will take to receive your refund. Additionally, you have a three-year window to claim any refund you are entitled to.

Similarly, you have three years to correct errors on your tax return and claim any missed refunds. If you file for an extension, you have until the date you officially file your return with the IRS to claim any owed money. After the three-year deadline, any unclaimed refunds become the property of the federal government.

There are exceptions to this rule. Taxpayers claiming deductions for bad debt or worthless securities have up to seven years to request a refund. Additionally, the time limit does not apply to individuals who are unable to manage their financial affairs due to physical or mental impairments.

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