If you owe back taxes to the IRS that you cannot afford to pay, the worst action is to ignore the bills. The IRS has extensive powers to garnish wages, seize bank accounts, and place liens on property. Instead, you must negotiate a resolution agreement using tax relief programs.
1. Offers in Compromise (OIC)
An OIC allows you to settle your tax liability for less than the full amount you owe. To qualify, you must demonstrate to the IRS that your income, assets, and future earning capacity make it impossible to pay the full balance before the collection statute expires. The IRS accepts less than 40% of OIC filings, so professional preparation is vital.
2. Installment Agreements
If you do not qualify for an OIC, structured Installment Agreements allow you to pay your debt in monthly increments over up to six years. While interest and penalties continue to accrue during the plan, structured agreements shield you from IRS collections and asset seizures.