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Knowledge & Insights

Ways to Settle Your Tax Debt with the IRS


Are you among the taxpayers who cannot pay their tax bill by the April 18, 2023, deadline? Don’t panic. The IRS offers several options to help you meet your obligations. Whether you’re struggling to make ends meet or dealing with financial hardship, there are ways to settle your tax debt with the IRS.

Managing Your IRS Tax Debt: File Your Tax Return or Request an Extension

Firstly, it’s important to file your tax return or request an extension of time to file, even if you can’t pay your full tax bill. This will help you avoid a failure-to-file penalty. Note that an extension applies only to the filing deadline, not the payment deadline.

Make a Partial Payment or Consider Payment Options to Settle your Tax Debt with the IRS

If you can’t pay the full amount of taxes you owe by April 18, you should file and pay what you can. Making a payment, even a partial payment, will help limit penalty and interest charges. Additionally, you may consider the following payment options:

Online Payment Plans

You don’t have to wait for a tax bill to set up a payment plan. Apply for a payment plan at These plans can be either short- or long-term.

  • Short-term payment plan – The payment period is 180 days or less, and the total amount owed is less than $100,000 in combined tax, penalties and interest.
  • Long-term payment plan – The payment period is longer than 180 days, paid in monthly payments, and the amount owed is less than $50,000 in combined tax, penalties and interest.

Offers in Compromise

An offer in compromise lets taxpayers settle their tax debt with the IRS for less than the full amount they owe. The IRS considers your unique set of facts and circumstances when deciding whether to accept an offer. You can see if you’re eligible and prepare a preliminary proposal with the Offer in Compromise Pre-Qualifier Tool.

Penalty Relief

Taxpayers may qualify for penalty relief if they tried to comply with tax laws but were unable due to circumstances beyond their control.

Be Aware of Penalties and Interest

The IRS may charge you a failure-to-file penalty, typically amounting to five percent of the tax owed for each month or part of a month that your tax return is late, with a maximum penalty of 25 percent. If you fail to pay the taxes you report on your tax return by the due date, you will incur a failure-to-pay penalty.

The unpaid amount of tax serves as the basis for calculating interest, which increases daily until the full amount is paid. The IRS compounds the interest on a daily basis, evaluating it in conjunction with the interest on the previous day’s balance. Interest rates are reviewed every three months and may differ depending on the type of tax.

Remember the Payment Deadline

Lastly, remember that an extension of time to file your tax debt with the IRS is not an extension of time to pay. An extension only gives you until October 16, 2023, to file your 2022 tax return, but taxes owed are still due on April 18, 2023.

Take Action and Explore Your Options

In conclusion, if you can’t pay your tax bill, it’s important to take action and explore your options. By doing so, you can avoid penalties and interest charges while managing your tax debt. Contact the IRS or a tax professional to determine the best course of action for your unique situation.

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