The tax bill is bigger than the balance in your checking account. It happens to freelancers who skipped estimated payments and to anyone whose withholding fell short. The worst response is to not file; the second worst is to grab the first loan you can find. In 2026 you have four realistic ways to cover what you owe, and the cheapest one is usually the IRS itself.
File first, even if you cannot pay
The IRS charges a failure-to-pay penalty of 0.5% of the unpaid tax for each month or part of a month it stays unpaid, up to a cap of 25%. On top of that, underpayment interest for individuals is 7% for the second half of 2026, compounded daily. Ignore the notices long enough and the penalty rate doubles to 1% a month once you are more than 10 days past a notice of intent to levy. Filing on time also keeps you eligible for the reduced penalty rate that comes with an approved payment plan, described below.
Option 1: an IRS payment plan
The IRS will finance its own bill, and its terms beat almost everything else on this list.
- Short-term plan. If you can pay the full balance within 180 days, there is no setup fee. You still owe interest and the failure-to-pay penalty until the balance is gone, but nothing extra for the arrangement itself.
- Long-term plan (installment agreement). Individuals who owe $50,000 or less in combined tax, penalties and interest, and who have filed all required returns, can apply online. Setup fees as of September 2026: $29 online with direct debit, $69 online without it; applying by phone, mail or in person costs $107 with direct debit or $178 without. Low-income taxpayers get the direct-debit fee waived and pay a reduced $43 otherwise, reimbursed when the plan is completed.
- Guaranteed agreement. If you owe income tax only, $10,000 or less, and agree to pay it off within three years, you qualify for a guaranteed installment agreement.
Here is the number that matters. While an approved installment agreement is in effect, the failure-to-pay penalty drops from 0.5% to 0.25% a month for taxpayers who filed on time. That is 3% a year in penalty plus 7% in interest, so the all-in cost of an IRS plan runs roughly 10% a year in late 2026. There is no fixed month count on the streamlined plan; the balance simply has to be paid before the IRS’s collection statute on that year runs out. Interest and some penalties keep accruing the whole time, so the plan is a loan, not a pause.
Option 2: a personal loan
An unsecured personal loan pays the IRS in full, which stops the penalty clock, and replaces it with a fixed monthly payment. The catch is price. Three-year personal loans averaged about 13.4% APR in 2026, and many lenders charge an origination fee of 1%–8% of the amount borrowed, taken off the top; on a $10,000 loan, a 5% fee means $500 gone before the IRS sees a dollar. Borrowers with strong credit can do better. Discover, for example, offered $2,500–$40,000 at 6.99%–24.99% APR with no origination fee as of July 2026, and federal credit unions are capped at 18% APR on most loans through September 2027. Below roughly 10% APR with no fee, a personal loan can beat the IRS plan; above it, the IRS is cheaper. The current market is in Personal Loan Rates in 2026.
Option 3: a credit card
The IRS accepts cards through third-party processors, and the convenience fee is modest: 1.75% at Pay1040 or 1.85% at ACI Payments for a credit card (minimum $2.50), or a flat $2.10–$2.15 for a consumer debit card, per the IRS card-payment page as of mid-2026. The fee is not the problem; carrying the balance is: the average APR on interest-accruing card accounts was 22.15% in the second quarter of 2026, more than double the cost of an IRS plan. Paying a $10,000 tax bill by credit card costs about $175–$185 in processor fees; carrying that $10,000 at 22.15% for a year costs roughly $2,200 in interest. A card makes sense only if you will pay the statement in full, or you hold a 0% introductory offer and a written plan to clear the balance before it ends.
Option 4: home equity
A home equity line of credit averaged about 7.25% in mid-2026, the cheapest borrowed money on this list. Two cautions. First, the interest is not deductible: the 2025 tax law made permanent the rule that home-equity interest counts only when the proceeds buy, build or substantially improve the home that secures the loan, and a tax bill does not qualify. Second, you are converting an unsecured debt to the government into a lien on your house. An IRS plan you fall behind on generates notices; a HELOC you fall behind on can end in foreclosure. Home equity is a reasonable tool for a large balance you can retire quickly, not a place to park a tax bill indefinitely. Pricing and draw limits are in our 2026 HELOC and home equity guide.
What not to do
Do not pay the IRS with a payday or title loan. A typical two-week payday loan at $15 per $100 works out to an APR of almost 400%, roughly forty times the IRS plan’s cost; the math is in The Real Cost of Alternative Lending. And if the balance is genuinely beyond you, look at an offer in compromise before you borrow: the application fee is $205, a lump-sum offer requires 20% of the offered amount up front, every required return must be filed, and the IRS provides a free online Pre-Qualifier tool. Taxpayers who qualify for low-income certification have the fee and the initial payment waived while the offer is considered.
The order of operations
- File on time, pay what you can, and set up the IRS plan the same day if you need more than a few weeks.
- Compare a personal loan only if your credit qualifies for a rate below the IRS plan’s roughly 10% all-in cost, and only with no origination fee.
- Use a card for the convenience fee alone, never for the interest.
- Tap home equity only for a large balance you will retire fast, knowing the interest is not deductible and the house is on the line.
The IRS is a patient creditor with a published price list. For most people who cannot write the check in April, it is also the cheapest lender in the room.