When you owe taxes explained

  1. Pay the full balance owed by the filing deadline or as soon as possible to minimize penalties and interest charges.
  2. If you are unable to pay in full, consider obtaining a loan or using a credit card (refer to No. 4 below). The interest rates on loans or credit cards can sometimes be lower than the penalties and interest imposed by the IRS and/or state authorities.
  3. Consider setting up an Installment Agreement or Payment Plan (IRS Form 9465) with the IRS and/or your state. (California requires automatic debit setup – no form is needed.)

Key points about installment agreements:

  • Penalties and interest continue to accrue on the unpaid balance during the installment period.
  • Make your initial payment by the filing deadline using the federal form 1040V payment voucher provided by Summit Financial.
  • Sign and mail the Installment Agreement Request provided.
  • If you do not receive a payment notice from the IRS by the agreed-upon date, make your payment regardless. The IRS may take up to two to three months to send a notice but maintains accurate records of your account. Include the primary taxpayer's Social Security number and tax year in the memo section of your check for proper crediting.
  • You can opt for direct debit from your checking or savings account.
  • A one-time user fee will be deducted from your initial payment to establish the installment agreement.
  • Failure-to-pay penalty: You will accrue a penalty of 1/4 of 1% (accrued daily) on any unpaid taxes after the due date, not exceeding 25% of the unpaid tax.
  • Interest: Interest is calculated based on the amount of unpaid tax and rates change quarterly. Visit irs.gov for the latest rates.
  1. Payment via credit card: Payment options are available through a service provider, subject to a convenience fee typically equal to 2.49% of the balance.


Please be aware that filing for an extension (of time) to submit your return does not grant you any extension of time to pay your tax liability.

This information is not intended to be substitute for specific individualized tax or legal advice. We suggest you discuss your specific tax issues with a qualified tax advisor.