What if I can't pay my taxes on time?

While many Americans will receive a tax refund, the percentage who owe the IRS has been steadily rising, according to consumer analytics platform Civic Science, edging up from 39% in 2021 to 43% in 2023.

Not paying your tax bill can result in the government garnishing your wages, placing a lien on your property or even revoking your passport. An extension will give you more time to submit the proper tax forms but you're still expected to submit an estimated payment by April 15.

If you can't pay on time, however, you have several options — including IRS-sponsored plans, personal loans and tax relief companies.

If you don't have the cash right away, the IRS has installment plans that can help. There's no getting around interest and penalties, but you'll avoid more severe consequences.

The IRS's short-term payment plan gives taxpayers up to 180 days to settle their debt. It does carry a failure-to-pay penalty of 0.5% a month and interest will accrue on what you owe until the balance reaches 25% of the total due.

You can still get on a payment plan if you don't have the funds within six months, but there are additional fees. And, as with a short-term plan, you'll be hit with a 0.5% failure-to-pay penalty.

If you register for automatic monthly withdrawals online, there is a $31 set-up fee. If you set up direct debit over the phone, through the mail or in person, however, the fee is $107. You can opt to make regular payments yourself, but the fee is $130 if you register online or $235 over the phone, through the mail or in person.

With a long-term payment plan, you can typically set how much your monthly payment is, but you must choose an amount that enables you to clear your debt in 72 months.

You can also apply to the IRS for an offer in compromise (OIC), a request to settle your tax bill for less than the full amount owed. The agency considers your income, expenses and ability to pay, among other factors, and approvals are rare: According to the most recent data from the IRS,only about a third of the 36,000 OICs submitted in 2022 were accepted.

If you don't have great credit, a personal loan may be easier to get approved for than a 0% APR credit card. Before you apply, however, compare rates and fees with what you would pay through an IRS installment plan. (Be sure to consider how long it will take to settle your tax bill.)

Avant Personal Loans is a good option if you have poor credit since it accepts borrowers with scores as low as 580. Loans are capped at $35,000, however, and you'll have 12 to 60 months to repay the loan.

You only need a credit score of 300 to be approved by online lending platform Upstart, which offers loans of up to $50,000 and repayment terms of between 36 and 60 months.

Tax relief companies work with the IRS or your state revenue department to reduce or eliminate your tax debt, arrange installment plans and stop garnishments and liens.

Community Tax offers a free initial consultation and charges an average of $295 for the investigation phase, the lowest among the tax relief companies we've reviewed. You do need to owe at least $7,500 in taxes and Community Tax doesn't operate in Minnesota or North Dakota.

Precision Tax Relief requires clients to have a tax debt of at least $10,000, but it has a 94% success rate with offers in compromise. It received an A+ rating from the Better Business Bureau and offers a free 30-day money-back guarantee.

If you own your residence, you can leverage your home equity to get cash with a home equity line of credit (HELOC). The interest rate on a HELOC is usually lower than a credit card or personal loan. But they typically start at $10,000, so only consider a HELOC if your tax bill is five figures or more.

Fairway Independent Mortgage Corporationranked above average on J.D. Power's 2024 mortgage origination satisfaction survey and claims it can provide funding in as little as five days.

PNCcombines low rates, flexible credit requirements and great customer service. There is a low $100 minimum draw and, unlike most lenders, PNC will let you switch between a variable rate and a fixed rate after withdrawing your funds.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every tax article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of tax products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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