What To Do If You Owe The IRS And Can't Pay

By Todd Whalen - July 11, 2022

What To Do If You Owe The IRS And Can't Pay

Owing a significant amount of money to the Internal Revenue Service (IRS) is frightening, especially if the amount owed is more than you can afford to pay.
Should you ever find yourself in that position, always consult with a qualified tax specialist before making any payments. You probably have more options than you realize.

Request an Installment Agreement

The most common way to deal with an outstanding balance owed to the IRS is to set up an installment agreement where you agree to pay the amount before a specified time.
The IRS offers a short-term installment agreement option for anyone owing less than $100,000. These agreements are typically for 120-180 days to pay a debt in full.
Anyone owing less than $50,000 may qualify for a long-term installment agreement that allows them to make monthly payments for a period longer than 120 days. These long-term agreements come with a reduced setup fee if you let the IRS automatically deduct the monthly payments from your bank account.

Qualify for an Offer in Compromise

Another option is what is known as an "offer in compromise." In these situations, the taxpayer offers an amount that is less than the total balance, and if it is approved, the IRS will forgive the remaining balance.
Unfortunately, there are rules and regulations to qualifying for an offer in compromise. The IRS will consider everything from your income and expenses to your current assets before letting you off the hook for a portion of the amount owed to them.
If you have an experienced tax professional on your side that understands the details of the process, this can be an excellent way to settle your debt to the IRS.

Other Options to Consider

Other options like the first-time penalty abatement program or requesting penalty relief through a reasonable cause can both reduce the amount owed.
Get together with a qualified tax specialist to go over your specific case, and you might be surprised to learn that there is more help available than you realize.

Go Back