Can’t Pay Your IRS Tax Bill? Here Are Three Ways To Settle Your Tax Debt

Facing an IRS tax bill you can’t pay can feel overwhelming. 

There are many reasons you might land with back taxes due to the IRS, from scams to unreported income to incorrect deductions and many others. 

Many taxpayers avoid addressing the problem, hoping it will go away on its own. But the truth is that the IRS will continue pursuing collection, and penalties and interest will only add up, the longer you wait. 

The good news is that there are legal and structured ways to resolve your tax debt, and even if you don’t have the funds to pay in full.

Attorney Sammy Kim, a seasoned IRS tax attorney, has helped countless clients navigate these situations, ensuring that they can resolve their debts while protecting their financial future. 

Here are three of the most common and effective ways to settle an IRS tax bill:

1. Offer in Compromise (OIC)

An Offer in Compromise (OIC) is one of the most powerful tools for taxpayers who cannot pay their full IRS tax liability. With an OIC, you can legally reduce your tax debt to a smaller, manageable amount, potentially saving thousands of dollars.

To determine whether you qualify, the IRS looks at your income, expenses, asset equity, and ability to pay. Not everyone will be eligible, but a skilled tax attorney can help you assess your options and prepare a submission that meets the IRS’s strict requirements.

When applying for an Offer in Compromise, an experienced tax attorney can: 

• Ensure that all financial documentation is accurate and complete,
• Determine the right offer amount that is reasonable and likely to be accepted.
• Advocate you on disputable items using your specific circumstances.
• Represent you in negotiations to maximize the chances of approval.
• Monitor and advise your current compliance throughout the review process.
• File an appeal if the offer is rejected.

2. Installment Agreement

If you are unable to pay your taxes in full, an Installment Agreement allows you to pay your tax debt in monthly payments over time. This option does not reduce the total amount owed, but it can prevent enforced collection actions, such as levies and garnishments, while providing a structured path to resolve your debt. When the IRS approves an Installment Agreement, you should anticipate that Notice of Federal Tax Lien will be filed by the IRS if the debt exceeds $50,000 to protect the government’s interest and remained until the tax debt is satisfied. Lien filing notices usually arrive in Certified Mail. In certain circumstances, you could request the lien to be released before debt satisfaction.

There are different types of installment agreements:

• Streamlined Installment Agreements for smaller balances or straightforward cases
• Non-Streamlined Installment Agreements for larger balances or more complex situations. Typically, the taxpayers are required to submit their financial information on a Collection Information Statement (Form 433 series) even if the proposal is a full pay installment agreement.

A tax attorney can help determine the best type of installment agreement for your circumstances and make sure the payment plan is sustainable and minimizes the risk of default. 

An attorney can also negotiate on your behalf if your financial situation changes, helping you avoid IRS collection actions in the future.

3. Currently Not Collectible (CNC) Status

If your financial situation is such that you cannot pay any of your tax debt, the IRS may grant Currently Not Collectible (CNC) status, temporarily suspending collections. 

While interest and penalties continue to accrue, this status provides breathing room to stabilize your finances without the pressure of enforced collection. A good thing about being in CNC is that it does not suspend the Collection Statute Expiration Date from running. But the IRS may choose to revisit the taxpayers’ financial information every other year or so, compliance issues arise, or when the income increases over a certain range.

CNC is not a permanent solution, but it can prevent wage garnishments, bank levies, and other aggressive collection efforts while you recover financially. CNC can also release your passport when the State Department informs you that the IRS has certified your case to stop renewal process. 

A tax attorney can help determine whether CNC status is appropriate for your situation, file the necessary paperwork, and communicate with the IRS on your behalf to maintain this protective status.

Taking Action

The most important step in resolving IRS debt is to act before it escalates further. Ignoring the problem can lead to mounting penalties, interest, and enforced collection actions that make it even harder to resolve.

Working with a tax attorney like Sammy Kim ensures that your case is handled professionally and strategically, no matter what state you live in. 

By taking prompt action, you can reduce stress, avoid additional financial consequences, and achieve a resolution that might help you sleep better at night.

If you’re facing tax debt, contact IRS Tax Attorney Sammy Kim for a consultation today and take control of your situation before it becomes more complicated.

Frequently Asked Questions About IRS Tax Debt

Can a tax attorney help me reduce my IRS tax debt?
Yes, a tax attorney can assist you in negotiating with the IRS to explore options for reducing your tax debt, including payment plans, Offers in Compromise, or other resolutions depending on your situation. A tax attorney ensures accuracy, compliance, and the strongest chance of success.

How long does it take to resolve an IRS debt?
Resolution time varies depending on your financial situation, the IRS’s review process, and the method used. Offers in Compromise may take several months to over a year to process, while installment agreements can be approved relatively quickly. CNC status can be temporary, lasting until your financial situation improves.

Will penalties and interest stop if I obtain an Offer in Compromise or Installment Agreement?

Penalties and interest will continue to accrue even under an OIC or installment agreement, but negotiating through these methods may reduce the overall debt amount including penalties and interest and prevents enforced collection actions.