Should I File a Tax Return If I Can’t Pay My Taxes?

Finished your tax return and realized you owe money? Is it more than you can afford to pay right now? Are you thinking about not filing your tax return to avoid paying the taxes?


You still need to file your tax return even if you can’t pay the entire amount. 

Avoiding filing your tax return is only going to cost you more money in the long run. When you don’t file and pay your taxes, you get charged interest and penalties. Those fines can start adding up pretty quickly. 

Let’s take a look at how not filing your tax return can make your tax debt worse.

Failure to File Penalty

If you do not file your tax return, you will be assessed a Failure to File Penalty every month (or portion of a month) that you don’t file your tax return.

The Failure to File Penalty is based on what you owe. It is generally 5% per month and reach up to 25% of the unpaid tax depending on how late you file.  

Let’s take a look at an example. Say you owe $5000 to the IRS.

If you waited six months to file, the Failure to File Penalty just cost you another $1250.

Failure to Pay Penalty

The Failure to Pay Penalty is applied to any taxes not paid by the tax deadline. 

The Failure to Pay Penalty is generally 0.5% of the unpaid taxes per month. Like the Failure to File Penalty, it caps off at 25% of your unpaid taxes. 

You could be charged both penalties at the same time. If both penalties are applied in the same month, the Failure to File Penalty is reduced by the amount of the Failure to Pay Penalty for that month. This means a combined penalty of 5% is applied for each month–or portion of a month–your tax return was unfiled and payments late. 

If you haven’t paid your taxes after 5 months, the Failure to File Penalty will max out. The Failure to Pay Penalty, however, keeps going until it reaches its maximum of 25% of the unpaid taxes.

Interest on Penalties

Interest increases the amount you owe until you pay the balance in full. The date the IRS starts charging interest varies by the type of penalty. For example, interest in a Failure to Pay Penalty  starts on the date the IRS sends you a notice or assesses the penalty. Interest is calculated based on how much you owe for each day it’s not paid in full.

Pay As Much As You Can…As Soon As You Can

If you cannot pay the full amount of your tax bill, pay as much as you can. The sooner you pay at least something, the less money you are charged in penalties. 

The IRS also has payment options. The Fail to Pay Penalty rate is cut in half if you have a payment agreement with the IRS.

Get Help With Your Tax Debt

Do you owe more taxes than you can possibly pay? Are you getting charged with additional interest and penalties?

There are things you could do to reduce your tax debt. You may also be able to remove or reduce a penalty. Ready to negotiate with the IRS? Does it seem a little…intimidating?

Want some help from those that deal with the IRS every day?

Kedra A. Flowers CPA PC has a dedicated team of tax relief experts who have restored peace of mind to individuals struggling with the IRS and tax debt. 

Schedule a consultation to see how we can help solve your IRS problems.