What Happens If You Don’t Pay Your Taxes?
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The penalty for paying your taxes late is 0.5% of your taxes owed for each month or partial month your bill is unpaid. The maximum late-payment penalty is 25% of taxes owed.
You may be able to avoid or reduce penalties if you can prove a "reasonable cause" for not paying on time.
The IRS offers payment plans that can reduce your late-payment penalties.
If you don't pay your taxes by the filing deadline, even if you get a tax extension, it may mean paying even more money to the IRS in the form of penalties and interest.
Here are some consequences of not paying taxes — on time or at all — and how quickly the IRS will act.
What happens if you don't pay taxes on time?
The failure-to-pay penalty
If you don’t pay your tax bill in full by Tax Day, the IRS will charge interest on the outstanding amount. The IRS may also levy a late-payment penalty (sometimes called a failure-to-pay penalty) of 0.5% per month, with a maximum penalty of 25% of your unpaid taxes.
» Learn more: How much interest does the IRS charge on late taxes?
Notices start to arrive within 1-3 months
If you're issued a failure-to-pay penalty, the IRS will send you a letter about your outstanding balance. You may receive more than one letter. The agency says if you can prove a reasonable cause for paying late or if this is your first offense, you may be able to get the penalty reduced or removed.
Tax liens and collections calls may follow
If you take no action to respond to the notice(s) or make a payment, the IRS may ramp up its collection tactics.
A tax lien is a legal claim against property and financial assets you own or may have coming to you. It’s not a seizure of your assets, but it is a claim on them. If you sell the asset, the government could be entitled to some or all of the proceeds.
Liens are often public records. That means that even if they're not on your credit report, liens could affect your ability to get loans, get a job or keep a security clearance. Filing for bankruptcy may not necessarily get rid of the lien or your tax bill.
The IRS may send your account to a private collection agency. The IRS will send you a notice should that happen, and it will give you the collection agency’s contact information.
IRS levies and passport restrictions
Continuing to ignore notices and not taking steps to repay your tax debt could lead to more serious consequences, such as a tax levy or passport seizure, within a few months' time.
A tax levy is the actual seizure of your assets — property, bank accounts, Social Security payments or even your paycheck — to pay your debt.
The IRS can levy, seize and sell any type of personal property that you own or have an interest in, such as your car or real estate, and apply that money to your unpaid tax bill.
Ten days after a notice of intent to seize or levy is issued, the late-payment penalty rises to 1% per month. On top of all that, the State Department may not issue or renew your passport, and it might even revoke it if your accrued federal tax debt is over $62,000. For the 2025 tax year, this amount rises to $64,000.
What to do if you can't pay your taxes
If you can’t afford to pay your tax bill on time, the IRS recommends you pay what you can by the April 15 deadline.
The agency also offers tax payment plans that could help you pay off your debt. Enrolling in one shows you’re making an effort, can lower your late-payment penalty to 0.25% per month, and could help ward off levies.
Another relief option is an offer in compromise. This IRS program allows taxpayers to settle their debt for less than the original amount owed. You can apply for it on your own, but note that the IRS typically accepts fewer than half of the applications.
To try to keep the problem from happening again next year, review your W-4 form to make sure you’re having enough tax withheld from your paychecks during the year to cover your expected tax bill.
