Yes, you can defer federal tax payments, and in most cases the IRS will work with you. The route depends on how much you owe and why you can’t pay: a routine payment plan for balances up to $50,000, a formal hardship extension under Internal Revenue Code Section 6161 for up to six months, or automatic postponements for military members in combat zones and taxpayers in federally declared disaster areas. Interest keeps running on almost every option, so deferring buys you time, not forgiveness.
IRS Payment Plans Are the Default Option
Before anything more elaborate, know that the IRS offers two payment plans that require no proof of financial hardship. These are what most people use when they can’t pay by the deadline.
Short-Term Plans up to 180 Days
If you can clear the balance within 180 days, a short-term plan has no setup fee. Interest and the failure-to-pay penalty still accrue during the window, but you avoid liens and levies.1Internal Revenue Service. Topic No. 202, Tax Payment Options Individuals apply through the IRS Online Payment Agreement tool; businesses must call.
Long-Term Installment Agreements
If 180 days isn’t enough, a long-term installment agreement stretches monthly payments out over as long as 10 years. Individuals who owe $50,000 or less in combined tax, penalties, and interest can generally set one up online. If you owe $10,000 or less (before interest and penalties), have filed on time for the past five years, and agree to pay within three years, the IRS must approve the request. That’s called a guaranteed installment agreement.1Internal Revenue Service. Topic No. 202, Tax Payment Options
Setup fees for long-term plans:
- Direct debit, applied online: $22
- Direct debit, applied by phone or mail: $107
- Other payment methods, applied online: $69
- Other payment methods, applied by phone or mail: $178
Low-income taxpayers, meaning those with adjusted gross income at or below 250% of the federal poverty level, pay no setup fee for direct debit agreements and a reduced $43 fee for other methods, which may be reimbursed after full payment.2Internal Revenue Service. Payment Plans, Installment Agreements
One benefit of having an approved installment agreement in place: the monthly failure-to-pay penalty drops from 0.5% to 0.25% as long as you filed your return on time.3Internal Revenue Service. Failure to Pay Penalty
Hardship Deferment Under Section 6161
When you need a lump-sum postponement rather than monthly installments, the IRS can grant an extension of time to pay under Section 6161. The standard is stricter than for a payment plan. You have to show that paying by the due date would cause substantial financial loss, not just inconvenience. The classic example is being forced to sell property at a fire-sale price to cover the bill.4Internal Revenue Service. Form 1127 – Application for Extension of Time for Payment of Tax Due to Undue Hardship
For tax shown on your return, the maximum extension is six months from the original payment deadline. Taxpayers living abroad can get more than six months. For a tax deficiency the IRS finds during examination, the extension runs up to 18 months, with an additional 12 months possible in exceptional cases.5Office of the Law Revision Counsel. 26 USC 6161 – Extension of Time for Paying Tax
Being short on cash isn’t enough on its own. The IRS looks at whether you have assets you could sell at fair market value, whether you’ve tried to borrow the money, and whether forcing immediate payment would create a loss out of proportion to the tax owed.
How to Apply for a Hardship Extension
You request a hardship extension by filing Form 1127, “Application for Extension of Time for Payment of Tax Due to Undue Hardship.” The form asks for the tax year, the amount owed, the return type, and the specific date you propose to pay.6Internal Revenue Service. About Form 1127, Application for Extension of Time for Payment of Tax Due to Undue Hardship File it as soon as you realize you can’t pay. The IRS expects it before the payment deadline, not after.
Two financial attachments are required: a statement listing all your assets and liabilities as of the end of the most recent month (including both book value and market value of any securities), and an itemized breakdown of your income and expenses for each of the three months before the tax due date.4Internal Revenue Service. Form 1127 – Application for Extension of Time for Payment of Tax Due to Undue Hardship The IRS may also ask you to complete Form 433-A, a more detailed collection information statement covering bank balances, real estate equity, vehicle values, and monthly living expenses.7Internal Revenue Service. Form 433-A – Collection Information Statement for Wage Earners and Self-Employed Individuals
You also need a written explanation of why paying on time would cause substantial financial loss. A vague statement that you’re struggling won’t work. Attach supporting evidence: medical bills, records of denied loan applications, insurance claim documentation, anything showing you’ve exhausted your options.
Form 1127 can’t be filed electronically. Mail the completed package to the IRS Advisory Group Manager for the area where you live or run your business. Publication 4235 lists the addresses. Gift tax obligations reported on Form 709 go to a separate address in Florence, Kentucky.4Internal Revenue Service. Form 1127 – Application for Extension of Time for Payment of Tax Due to Undue Hardship Use certified mail with a return receipt. If approved, the IRS sends a notice with the new deadline and any conditions attached. Keep that letter in case collection notices arrive before the system catches up.
Interest and Penalties Keep Running
Deferral does not stop the meter. Under Section 6601, interest accrues from the original payment deadline no matter what extension, installment agreement, or hardship approval you have. The statute is explicit that extensions of time are disregarded when calculating the interest start date.8Office of the Law Revision Counsel. 26 U.S. Code 6601 – Interest on Underpayment, Nonpayment, or Extensions of Time for Payment, of Tax
The IRS sets the underpayment interest rate quarterly. For the first quarter of 2026, the rate for individuals is 7% per year, compounded daily.9Internal Revenue Service. Interest Rates Remain the Same for the First Quarter of 2026 Starting April 2026, the rate drops to 6%.10Internal Revenue Service. Internal Revenue Bulletin No. 2026-8 Rates change each quarter, so check the current figure before you plan a payoff.
The failure-to-pay penalty adds another 0.5% of the unpaid balance per month or partial month, capped at 25%.3Internal Revenue Service. Failure to Pay Penalty The failure-to-file penalty is much steeper: 5% per month, also capped at 25%. When both apply at once, the failure-to-file penalty is reduced by the failure-to-pay amount, but the combined charge still hits 5% per month.11Internal Revenue Service. Topic No. 653, IRS Notices and Bills, Penalties and Interest Charges File your return on time even if you can’t pay. Filing on time and paying late is far cheaper than doing neither.
Automatic Extensions for Combat Zone and Disaster
Two groups of taxpayers get automatic deadline extensions without any application and, in one case, without interest or penalties.
Military Personnel in Combat Zones
Members of the Armed Forces serving in a designated combat zone, along with support personnel deployed there, get an automatic suspension of all filing and payment deadlines. The protected period covers the time in the zone plus 180 days after leaving.12Office of the Law Revision Counsel. 26 USC 7508 – Time for Performing Certain Acts Postponed by Reason of Service in Combat Zone or Contingency Operation No interest or penalties accrue during this window.13Internal Revenue Service. Extension of Deadlines – Combat Zone Service Personnel hospitalized for injuries from the zone get their hospitalization time added before the 180-day clock starts. The protections extend to spouses filing jointly, and to contingency operations designated by the Secretary of Defense, not only formally declared combat zones.
Federally Declared Disasters
When the President declares a federal disaster, the IRS can postpone filing and payment deadlines for affected taxpayers by up to one year. The same authority covers significant fires and terroristic or military actions.14Office of the Law Revision Counsel. 26 USC 7508A – Authority to Postpone Certain Deadlines by Reason of Federally Declared Disaster, Significant Fire, or Terroristic or Military Actions The IRS announces which geographic areas qualify and what the new deadlines are, and waives interest and penalties for the postponed period. Unlike combat zone relief, disaster relief requires the IRS to identify you as an affected taxpayer, usually based on your address falling within the declared area.
When You Genuinely Can’t Pay
Deferment assumes you’ll eventually pay. If your situation is severe enough that even monthly installments would keep you from covering basic living expenses, two other options apply.
Currently Not Collectible Status
The IRS can classify your account as currently not collectible, which suspends active collection. No levies, no garnishments. The debt doesn’t disappear and interest still accrues, but the IRS stops trying to collect until your finances improve. You have to demonstrate through documentation that paying anything would leave you unable to meet necessary living expenses.15Internal Revenue Service. IRM 5.16.1 Currently Not Collectible The IRS reviews these accounts periodically. The 10-year collection statute keeps running while you’re in this status, so if the situation lasts long enough, the debt can eventually expire.
Offer in Compromise
An Offer in Compromise lets you settle for less than the full amount owed. The IRS weighs your ability to pay, income, expenses, and asset equity. You must be current on all filings and estimated payments and cannot be in an open bankruptcy.16Internal Revenue Service. Offer in Compromise
Applying costs $205 plus a nonrefundable initial payment: 20% of your offer amount for a lump-sum proposal, or the first monthly installment for a periodic payment proposal. The IRS pauses collection while it evaluates the offer, though it may file a federal tax lien. If the IRS doesn’t decide within two years, the offer is automatically accepted. Taxpayers with income at or below 250% of the federal poverty level can request a fee waiver.16Internal Revenue Service. Offer in Compromise The IRS offers a Pre-Qualifier Tool on its website to help you gauge your chances before spending the money to apply.