9 Things to Do if You’re Facing a Big Tax Bill

You can get a tax filing extension, but you’ll still be expected to pay your taxes by the April 15 deadline. For 2025, the extension is Oct. 15. Although you’ll owe penalties on unpaid taxes, you’ll dodge the more onerous late filing fee penalty.

4. Look for ways to pay your taxes now

If you can scrape together some cash to pay off your tax bill now, you can avoid the IRS penalties and interest.

Perhaps you can sell off some stock or other investments. If you have an emergency fund, paying your tax bill might qualify as an emergency. If you have to take a required minimum distribution (RMD) this year from a retirement account, consider taking it now instead of waiting until the end of the year. You might even want to consider getting a temporary part-time job to earn some extra money. 

Borrowing money could be a good option if you can get a no-interest or low-interest loan from a friend or family member. If you can’t, it still might be cheaper to borrow from a bank and pay your tax bill on time than to pay later and incur the IRS penalties and interest. Tapping into your retirement funds may also help. If you’re under age 59½ you can take up to $1,000 per year out of an IRA or 401(k) plan for an emergency without having to pay the 10 percent early withdrawal penalty, although you’ll still have to pay federal and possibly state taxes on the withdrawal.

5. See if you can get more time to pay

If you can’t pay your tax bill now, the IRS might let you pay it later, either through a payment extension or through a payment plan that spreads out the payments over time to make the bill more manageable.

Payment extensions are only available if paying your taxes now would create an “undue hardship.” According to the IRS, an undue hardship is more than just an inconvenience. You have to show that you would suffer a substantial financial loss by paying your taxes by April 15, such as having to sell property at a drastically reduced price. If you meet the undue hardship standard, you could get an extension of up to six months (or even longer if you’re out of the country).

Alternatively, you may be eligible for a short-term payment plan of up to six months or a long-term payment plan of up to six years. You can fill out Form 9465 to apply for a payment plan or call the IRS directly at 800-829-1040. If you owe $50,000 or less and are seeking a long-term plan, or you owe $100,000 or less for a short-term plan, you might be able to avoid filing Form 9465 and apply for an installment agreement on the IRS website, says IRS spokesman Eric Smith. (Bonus: If you establish an installment agreement using the IRS's Online Payment Agreement application, you’ll pay a lower user fee than you would with Form 9465.)

The IRS will want to know how much you can pay on the balance, and it might suggest a higher payment. In any event, you’ll still owe accumulated fees and penalties, but you should be able to arrange a payment plan that will work for your budget.

6. Offer to pay less than what you owe

If you can’t pay all the taxes you owe but can pay some of them, an Offer in Compromise (OIC) might be the way to go. With an OIC, you offer to pay the IRS what you can reasonably afford. The IRS says it will typically approve an OIC if the amount you offer is the most it can expect to collect within a reasonable period of time. There are some eligibility requirements that you must meet to qualify for an OIC:

• Filing all required tax returns.
• Making all required estimated tax payments.
• Not being in an open bankruptcy proceeding.
• Having a valid tax filing extension for the current year return

There are two payment options with an OIC: lump sum or periodic payments. With the lump-sum option, you pay 20 percent of your offer amount upfront with the application and then the rest within five months. With periodic payments, you send the first payment with your application and pay the the rest over six to 24 monthly payments.

7. Ask to have your tax bill, penalties and/or interest waived

Wouldn’t it be nice to have your tax debt wiped clean, including penalties and interest? It’s possible — but rare.

Let’s start with tax penalties, which can be waived under certain circumstances. If this is your first tax penalty, ask the IRS for a first-time penalty abatement, suggests Bishop Toups, an estate planning, elder law and tax attorney in southwest Florida. Don’t make it a habit to ask for this one-time break. “You just get one ‘get-out-of-jail free’ card,” Toups says.

The IRS can also waive your tax penalties if you “exercised ordinary care and prudence” but were still unable to file your return or pay your taxes on time due to circumstances like a natural disaster, house fire or serious illness.

Interest is more difficult to erase. If a penalty is waived, any related interest is also eliminated. Otherwise, the IRS will only reduce your interest if the agency made an unreasonable error or delay.

In some cases, the IRS can declare a tax debt "currently not collectible" if you are sick or have other reasons that you can’t pay your tax bill. You’ll stop getting calls and enforcement letters from the IRS, Toups says. But, in theory, that debt could remain on the books until you pay or the statute of limitations eliminates the debt — 10 years for most tax issues.

8. Don’t ignore mail from the IRS

You’ll get several notices from the IRS for late tax payments or nonpayments, ranging from a polite notice to increasingly alarming ones. Eventually, the IRS will dispatch a representative to talk to you in person or on the phone. The agent will ask you detailed questions about your finances and propose several different options for you to pay your taxes, ranging from demanding immediate payment, selling your assets, or having your wages or bank accounts seized.

To keep a lid on the situation, always respond to IRS notices. Ignoring them could lead to a visit from a debt collection agency.

Also, get help if you need it. Consider hiring an attorney, CPA or enrolled agent who can represent you before the IRS.

9. Learn from the experience

One of your goals should be to prevent an unexpected tax bill in the future. So make sure you understand why your taxes were so high this year — and, if possible, take steps to avoid making the same mistake again.

Not having enough income tax withheld from your paychecks is one common issue that can trigger a big tax bill. Fortunately, the IRS has a useful tool for figuring out the proper amount of withholding for your taxes.

If you don’t have taxes withheld from your income — such as from self-employment income or profits from the sale of stock – then making estimated tax payments during the year will do the trick.