What to Do If I Can’t Pay My Taxes?

What You Can Do If You Owe the IRS and Can’t Pay Your Taxes

If you owe taxes to the Internal Revenue Service (IRS) but you can’t pay them, there’s no need to panic. The IRS offers various solutions for tax payment problems. This area of tax law, where the taxpayer doesn’t dispute the taxes owed, is known as tax resolution. If you do dispute the amount of taxes, this would be considered a tax controversy.

Also be sure to see our Guide to the Law for Taxpayers.

1. File Your Return on Time, Even If You Can’t Pay

Failing to file altogether incurs additional penalties and can complicate resolving the issue. You don’t necessarily need to make a payment at the same time as the filing.

2. Pay What You Can

Even a partial payment demonstrates good faith and lowers the total amount owed.

3. Explore Payment Options

The IRS offers various options to help you repay your tax debt:

  • Installment Agreement: Spread your outstanding balance over a manageable monthly payment plan. You can typically apply online or by filing Form 9465. The monthly amount would be based on the total you owe, as well as your income and expenses, and assets you own.
  • Offer in Compromise (OIC): If you can’t afford to repay the full amount, you may be eligible to settle for a lump sum payment less than what you owe. This option requires meeting specific criteria and submitting additional forms. The offer-in-compromise is difficult to qualify for, and requires you to have very low income and very minimal assets.

If you plan to apply for either an installment agreement (IA) or offer in compromise (OIC), be prepared to fill out detailed forms with your current income, expenses, and assets (including houses, vehicles, investments, etc).

4. Seek Professional Help

A tax attorney or enrolled agent can advise you on the best course of action based on your specific situation. They can also help you negotiate with the IRS and navigate the application process for payment plans or OICs.

Here are some additional resources that you might find helpful:

IRS – What if I Can’t Pay My Taxes?

National Association of Enrolled Agents (NAEA)

Remember, the IRS is generally willing to work with taxpayers facing difficulties. Communicating with them and taking proactive steps demonstrates your willingness to resolve the issue. Penalties and interest can accrue quickly on unpaid taxes. The sooner you address the situation, the better.

5. Other Things To Know About Tax Collections

Does tax debt ever expire?

Yes! After 10 years from the date the taxes are assessed, the IRS can no longer collect the taxes. This expiration is known as the Collections Statute Expiration Date (CSED).

The assessed date is generally the day on which you file your tax return. For example, if you filed your tax return for 2009 on April 15, 2010, any tax debt for 2009 would generally be expired as of April 15, 2020. However, there are exceptions, such as if you filed for bankruptcy, which can extend the expiration date.

If you never filed a tax return, the IRS will generally do it for you. The assessed date would be when the IRS files the return, which can be several years after the tax period.

Can the IRS seize my assets if I can’t pay my taxes?

Yes, this is called a levy. The IRS can place a levy on many types of assets, including bank accounts, paychecks (aka wage garnishment), real estate, cars, and more.

Is there any way to stop the IRS from taking my property?

Yes, if you have low to middle income, AND have limited assets. If you are able to prove both of these, you may be able to stop the IRS from seizing your assets and qualify for either a monthly payment plan or an offer-in-compromise. A payment plan is exactly as it sounds: you pay a certain amount to the IRS each month until your debt is paid off. An offer-in-compromise is a type of debt settlement in which the IRS agrees to forgive a portion of your tax debt. The offer-in-compromise is difficult to qualify for, and requires you to have very low income and very minimal assets.

Further Reading

Guide to the Law on Taxes

Guide to Tax Controversies and Disputes

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