IRS Tax Resolution Options (how to do I deal with my IRS tax debt)
If you owe taxes but can’t pay in full, the IRS has options for you. Most importantly, make sure you file your tax return and pay as much as you can. Then let the IRS help you choose your best option to pay. Here are some options to consider, even if you can’t pay the full amount right now:
- Borrow the money. If you don’t have the money to pay all your taxes now, then you may want to get a loan from a bank or other source. The interest rate may be lower than the interest and penalties the IRS charges on late taxes. You also may be able to borrow against your assets or sell them to raise cash.
- Make an Online Payment Agreement. If you are unable to pay in full, then consider paying over time. If you owe $50,000 or less, you can apply for an installment agreement. You may choose to make convenient monthly direct debit payments for up to 72 months. With this option, there are no checks to write or send. And you won’t miss a payment or pay late. The best way to apply is to use the IRS Online Payment Agreement tool on IRS.gov. If you don’t have access to the Internet, you can apply by filing Form 9465, Installment Agreement Request.
The IRS can also help if your tax debt is more than $50,000 or you need more than six years to pay. In these cases, the IRS may ask for further financial information. See Form 433-A or Form 433-F, Collection Information Statement.
- Use an Offer in Compromise as a last resort. An Offer in Compromise is an agreement that allows you to settle your tax debt for less than the full amount. Generally, the IRS will accept an offer if it represents the most the agency can expect to collect within a reasonable time. The IRS looks at several factors to make a decision on your offer. Use the Offer in Compromise Pre-Qualifier tool on IRS.gov to see if you may be eligible for an OIC.
- Currently Not Collectible status – There are times where you agree you owe the IRS, but you can’t pay due to your current financial situation. If the IRS agrees you can’t both pay your taxes and your reasonable living expenses, it may place your account in Currently Not Collectible (CNC) status.While your account is in CNC status, the IRS generally won’t try to collect from you. For example: It won’t levy your assets and income. However, the IRS will still assess interest and penalties to your account, and may keep your refunds and apply them to your debt. You’ll also continue to receive an annual bill from the IRS because that is required under the law.
Before the IRS will place your account in CNC status, it may ask you to file any past due tax returns.
If you request CNC status, the IRS may ask you to provide financial information, including your income and expenses, and whether you can sell any assets or get a loan.
During the time the IRS may collect the balance you owe, it may review your income annually to see if your financial situation improved. Generally, the IRS can attempt to collect your taxes up to ten years from the date they were assessed, though the ten-year period is suspended in certain circumstances. The time the suspension is in effect will extend the time the IRS has to collect the tax.
Because the IRS won’t suspend interest and penalty charges, even if it stops trying to collect the balance due, you may want to consider other possible payment options within your means before asking the IRS to place your account in CNC status.
The IRS has also increased the amount that taxpayers owe before the IRS normally files a Notice of Federal Tax Lien. Find more information on these topics on IRS.gov.