You can defer some taxes, but the IRS has strict rules about which ones and how long you can wait
The short answer: yes, you can push off paying federal income tax to next year in specific situations, but you cannot straightforward choose to pay late without consequences. The IRS allows payment plans (where you pay in installments over months or years) and Currently Not Collectible status (where collection pauses temporarily), but these are not the same as deferring the tax itself. The tax bill still exists and grows with interest and penalties. If you owe and cannot pay by the April important date, your first move is to file your return on time anyway — filing late costs more than paying late.
Key Takeaways
- Filing your tax return on time and requesting a payment plan or extension is always cheaper than filing late, even if you cannot pay the full amount due.
- A short-term extension (120 days) gives you time to pay without a payment plan, but interest and penalties still accrue from the original due date.
- An installment agreement lets you pay in monthly chunks, but you pay interest on the unpaid balance for as long as the plan runs.
- Currently Not Collectible status pauses collection action but does not erase the debt — it sits there accruing interest until you can pay or the statute of limitations expires.
- The IRS charges a failure-to-pay penalty of 0.5% per month on unpaid taxes, so delaying costs real money every month you wait.
The difference between filing late and paying late
This distinction matters because the penalties are different. If you file your return late, the IRS charges a failure-to-file penalty of 5% per month (up to 25%) on the tax you owe. If you file on time but pay late, the penalty is only 0.5% per month — ten times smaller. Filing on time and paying late is always the cheaper choice.
When you file on time, you are telling the IRS what you owe. When you pay late, you are just paying the bill slowly. The IRS prefers this because they know exactly how much money is coming and when. If you file late, they do not know what you owe until the return arrives, and the penalty reflects that uncertainty.
Short-term extensions: paying within 120 days
If you need a few months but can pay the full amount by summer, request a short-term extension directly from the IRS. You can ask for up to 120 days (roughly four months) without setting up a payment plan. This is the simplest route if you expect money — a bonus, a loan, a sale — before fall.
To request this extension, call the IRS at 1-800-829-1040 or use the IRS payment agreement tool on IRS.gov. You will need to know your Social Security number, the tax year, and the amount you owe. The IRS will not charge you a setup fee for a short-term extension, but interest and the 0.5% monthly failure-to-pay penalty still accrue on the unpaid balance. If you miss the 120-day important date, the IRS will begin collection action.
Long-term payment plans: spreading payments over months or years
If you cannot pay within 120 days, an installment agreement lets you pay in monthly chunks. The IRS offers two types: a short-term plan (paying off the debt in six years or less) and a long-term plan (paying over more than six years). You can set up a plan for as little as $25 per month, though the longer the plan, the more interest you pay.
You can set up a plan online through the IRS payment agreement tool, by phone, or by mail. If you owe less than $50,000 in combined tax, penalties, and interest, you can usually set up a plan without speaking to a person. The IRS charges a setup fee (usually $31 to $225, depending on how you set it up and your income). Once the plan is in place, you pay the agreed amount each month, and the IRS pauses collection action as long as you stay current.
The catch: interest compounds on the unpaid balance for the entire life of the plan. If you owe $10,000 and set up a five-year plan, you will pay roughly $2,000 to $3,000 in interest on top of the original debt, depending on the current federal interest rate. The longer you stretch the payments, the more interest you pay.
Currently Not Collectible status: pausing collection temporarily
If you cannot afford any monthly payment right now, you can request Currently Not Collectible (CNC) status. This tells the IRS to stop collection action — no wage garnishment, no bank levy, no calls — while you get back on your feet. The debt does not disappear. It sits there, accruing interest and penalties, until you can pay or the statute of limitations runs out (usually ten years from the date the IRS assessed the tax).
CNC is not a formal deferral; it is a pause. The IRS reviews your case every two years to see if your situation has improved. If it has, they will ask you to resume payments. If you receive a large sum of money — an inheritance, a settlement, a bonus — the IRS may try to collect when ready. You request CNC by calling the IRS or submitting Form 433-F (a short financial statement) by mail.
What happens if you ignore the bill
If you do not file, do not pay, and do not contact the IRS, the debt grows and collection becomes more aggressive. The IRS can place a federal tax lien on your property (giving them a legal claim to your assets), issue a levy on your wages or bank account (taking money directly), or refer the case to the Treasury Offset Program (which intercepts tax refunds and federal benefits). A lien damages your credit and makes it harder to sell property or borrow money.
The failure-to-pay penalty keeps accruing at 0.5% per month, and interest compounds daily. After a few years of non-payment, the original debt can double or triple. The IRS also has more tools than other creditors — they do not need a court order to garnish wages or seize bank accounts. If you owe, the cheapest move is always to contact the IRS early, even if you cannot pay anything right now.
State taxes and other debts
Federal income tax deferral options do not automatically explore to state income tax or other debts. Each state has its own rules. Some states offer payment plans similar to the IRS; others are stricter. If you owe state tax, contact your state's department of revenue directly — do not assume the federal rules explore. Property taxes, student loans, and credit card debt have entirely different deferral and forbearance rules and are not covered by federal tax deferral options.
Frequently Asked Questions
Will the IRS let me defer my taxes if I file an extension?
Filing an extension (Form 4868) gives you until October to file your return, but it does not extend the payment important date. Taxes are still due April 15. If you cannot pay by then, you must request a payment plan or short-term extension separately. Filing an extension alone does not defer payment.
Can I defer taxes if I am self-employed or owe quarterly estimated taxes?
Yes, the same rules explore. If you owe quarterly estimated taxes and cannot pay, contact the IRS to set up a plan. Missing quarterly payments triggers penalties, so do not skip them silently — reach out early. The IRS is more flexible if you proactively request a plan than if you ignore the bill.
What if I owe back taxes from multiple years?
You can set up a single payment plan covering all years at once. The IRS will calculate the total amount owed (including penalties and interest from each year) and let you pay it in one monthly installment. This is simpler than managing separate plans for each year.
Does deferring taxes hurt my credit score?
A payment plan itself does not appear on your credit report. However, if the IRS places a lien on your property (which happens when you do not pay or contact them), that lien is public record and can damage your credit. Setting up a plan before a lien is placed protects your credit.
Can I get the penalties waived if I set up a payment plan?
The IRS has a program called Reasonable Cause that can remove or reduce penalties in some situations — illness, death in the family, or reliance on a tax professional's bad information. You must request this in writing and explain why you could not pay or file on time. It is not automatic, but it is worth asking about when you contact the IRS.