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What this calculator does
The IRS charges a failure-to-pay penalty of 0.5% per month. A payment plan has a setup fee plus a lower 0.25% monthly penalty. This calculator compares the two.
The math
Do-nothing penalty = balance × 0.005 × months. Plan cost = setup fee + balance × 0.0025 × months. Savings = penalty − plan cost.
Worked example
A $5,000 balance over 12 months costs $300 in penalties. A plan with a $130 setup fee costs about $280, saving $20.
Why this matters
High-fee products are designed to look small per week and huge in total. This calculator exposes the full cost so you can compare it to real alternatives.
Methodology and transparency
This page publishes the exact formula used to compute the result, so you can verify it in a spreadsheet or check the assumptions against your own situation. The worked example uses the tool default inputs; change any number and the result updates live in your browser. No data is sent or stored.
Common questions
Does the IRS always accept a plan?
Most taxpayers qualify for short-term plans if the balance is under a certain amount.
Does this include interest?
No. Interest accrues on both options. This calculator focuses on the penalty difference.