TL;DR: The IRS does offer a number of resolution plans that are available to indebted taxpayers. Find out which resolution plan works for you with your own circumstances. This guide explains who qualifies, the rules that apply, and how to apply them to your situation.

The IRS does offer a number of resolution plans that are available to indebted taxpayers. Find out which resolution plan works for you with your own circumstances.

One common instinct when you realize that you owe the IRS money is to skip filing altogether. But don’t skip filing your taxes just because you can’t pay! Because the IRS has backlogs, some people think they might be able to get away with not filing their taxes. You shouldn’t expect this backlog to work in your favor. It’s highly unlikely.

The IRS will always notice if you file late, and it will assess a late filing penalty. Tax returns are date stamped. Whether you file online or through the mail, the IRS can see the date you filed even if they don’t process your return right away. Failing to file makes the penalties that you’ll face much worse.

Interest Charges On Taxpayers’ Tax Debt

You’ll also deal with interest charges in addition to the basic penalties that the IRS accesses. The IRS charges interest on any type of balance that you owe until it’s paid in full.

• The original amount you owe on your tax return
• The interest that accrues on your tax debt

What You Can Do If You Can’t Pay Your Taxes When You File

If you can’t pay your taxes, there are three options that can help you avoid facing the aggressive collection actions that you can face from the IRS. Remember, the IRS can garnish your wages, place property liens and levy your bank accounts, all without any court order. You don’t want to just ignore your bill or try to hide from the IRS. The consequences of avoidance can be extremely damaging. Instead of hiding, you should be proactive and work with the IRS to use one of these solutions.

File CNC Status

If you simply don’t have any money available to pay your tax bill, you can file for Currently Not Collectible Status (CNC). CNC status is designed to help people who can’t afford to pay their taxes. It’s basically the IRS acknowledging that you can’t afford to pay, so they stop all collection actions until your situation improved.

Keep in mind that this does not stop penalties and interest. However, it will help you avoid wage garnishment and liens, which would make your tough financial situation even worse.

Set Up A Payment Plan

If you can afford to pay at least something towards your tax debt each month, you may want to consider an Installment Agreement (IA). This is a tax payment plan that breaks the amount you owe down into manageable monthly payments that work for your budget.

Installment Agreements allow you to pay off your tax bill in full. Penalties and interest continue to accrue even after you set up the payment plan and start making payments.

Settle Your Tax Debt For Less Than You Owe

The last option is to settle your tax debt for less than the full amount you owe. An Offer in Compromise (OIC) is the IRS’ version of debt settlement. They review your finances with you and determine how much you can reasonably afford to pay back. Then they will either help you set up a payment plan or determine if you can liquidate any assets to pay off the reduced amount in a single lump sum.

Resolve Your Tax Bills

If you’ve found yourself in a nasty mess with the IRS, take a deep breath. For taxpayers who may have difficulty paying off an excessive amount of tax debt, there’s a new and improved relief program that consolidates many major relief programs into a one-size-fits-all assistance program. Any issues regarding back taxes, unfiled years, or any other tax-related problems may be solved through one program; the IRS Fresh Start Program!