Resources: Guides
State and Federal Payment Relief Options
When it comes to facing tax penalties and payment challenges, it is important to communicate with the IRS or California Franchise Tax Board (FTB) immediately if the amount owed is a hardship, and explore different options to set up a payment plan or potentially reduce your tax debt. There are a variety of options, not all listed here, but that can be found on the IRS and FTB websites linked at the end of this article. Below are some frequently asked questions with important information you should know.
Please note that setting up a payment plan is a separate process and assistance is not provided through MyFreeTaxes.org or through our in-person and virtual Volunteer Income Tax Assistance (VITA) free tax preparation sites.
What is a tax penalty and how to avoid them?
The IRS and FTB both charge a penalty for not filing by the tax deadline if you owe taxes. They also begin to charge interest on any unpaid taxes starting the day after the filing deadline. By filing an extension, you will avoid a penalty for not filing on time, but please note that interest will still accumulate for any unpaid taxes owed. To keep interest fees down on unpaid taxes, try to pay as much of the amount due as possible before the tax deadline.
If you expect a refund, there is no penalty for filing late and an extension is not required. However, we still recommend filing as soon as possible, as there is a statute of limitations of how long you can wait to claim a refund. The filing deadline for individuals who are owed a refund have three years after the filing deadline of the specific tax year to claim their refund. This means the filing deadline for tax year 2023 will be April 15, 2026. This also means that if you are a CA tax filer and did not file your 2020 tax return, you have until May 17, 2024, to file and claim your refund; this deadline also applies to any missing 1st and 2nd stimulus payments you were eligible for and have yet to claim.
The filing deadline, usually around April 15, is the deadline to file taxes and pay if you owe the IRS or FTB. For Californians that owe taxes for tax year 2023, the deadline was April 15, 2024, unless you reside in San Diego County; San Diego County residents were granted an automatic tax extension until June 17, 2024.
How do you know if you owe taxes or not?
There are several factors that affect whether you owe taxes or not, including:
- Incorrect withholding amounts:
If you underpaid taxes on the income you made, this means you will owe a higher amount of taxes at the end of the year. If you overpaid taxes on the income you made by withholding a higher amount from your income, then you will receive a refund. - Eligibility for tax credits and deductions
If you are eligible for tax deductions or nonrefundable tax credits, these will lower your tax bill up to $0. If you are eligible for refundable tax credits, these are tax credits that can be cashed out if they surpass the amount of taxes owed, then you would receive a refund.
If you are unsure about how to fill out your withholding form (Form W-4), use the Withholding Calculator on the IRS website here.
Exploring payment plan options
For individuals who are unable to pay their tax liability in full, the IRS offers a short-term (180 days or less) and long-term (monthly installments) payment plans; the FTB offers a monthly installment agreement (up to three to five years maximum).
Type | Payment Plan Options | Eligibility | How to Apply |
IRS Short-term Payment Plan |
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IRS Long-term Payment Plan |
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| Can apply online, by phone, mail or in person.
Phone: 800-829-1040
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FTB Installment Agreement |
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| Can apply online, by phone, mail or in person.
Phone: 800-689-4776
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To apply for a payment plan with the IRS (federal taxes) click here. To apply for a payment with the Franchise Tax Board (California) click here.
Need support?
If your tax debt is more than what you can handle, the IRS and FTB offer additional relief options. To read more about options offered through the IRS, click here. To read more about options offered through the FTB, click here.
If you need additional support with navigating your federal tax debt relief options, you can also contact the Taxpayer Advocate Service (TAS) or a Low Income Taxpayer Clinic (LITC). Both the TAS and LITCs are independent of the IRS, and provide additional support to taxpayers.
The Taxpayer Advocate Service (TAS) can provide assistance if your tax issue is causing financial hardship, if you have attempted to resolve the problem with the IRS without success, or if you believe that an IRS system, process, or procedure is not functioning correctly. LITCs can assist you in navigating IRS notices, audits, appeals, tax collection issues, and other tax disputes at no cost or for a small fee.
For more information about the Taxpayer Advocate, click here. For more information about Low Income Taxpayer Clinics (LITCs), click here.