Facing a Tax Bill with the IRS? Know Your Options

Owing money to the IRS can be scary, regardless of the amount. But the consequences of ignoring the IRS can be severe including the filing of tax liens and/or levies. If you find yourself owing money to the IRS, addressing the issue early can avoid bigger problems down the road.

Options for paying your tax bill

Installment agreements. User fees will apply to setting up installment agreements, which will vary depending on whether the agreement is set up online or over the phone. In addition, fees can be reduced if you are setting up a direct debit agreement.

1. Full payment installment agreements. Depending on the amount you owe, there are options available to you if you fully pay the liability within the repayment period.  
   • Debts less than $25,000. Can go up to 72 months. Financial information generally not required. Direct debit agreement generally not required. May be able to avoid a tax lien filing. 
   • Streamlined criteria for debts between $25,000 – $50,000. Can go up to 72 months. Financial information may be required. Direct debit agreement required to potentially avoid a tax lien filing.
   • Expanded streamlined criteria for debts between $50,000 – $100,000. Can go up to 84 months. Financial information may be required. Lien determination will be made. NOTE – THESE ARE TEST CRITERIA AND CAN BE DISCONTINUED AT ANY TIME.
2. Partial payment installment agreements. This type of agreement is based on  current ability to pay and requires submission of your financial information. In addition, these types of agreements may result in a tax lien filing and are generally subject to review after 24 months.

Short-term extension of time to pay in full. The IRS will generally allow up to 120 days to pay the liability, plus the accrual of penalties and interest, in full. There is no fee for setting up this arrangement and no lien determination is made.

Hardship statuses. If you are experiencing a hardship, you may qualify for currently not collectible (CNC) status or an offer-in-compromise (OIC) to resolve your balance. Lien determinations will be made for both of these options. There is no fee for CNC status but financial information is required. An application fee and a down payment are required for an OIC. Financial information is used to determine your reasonable collection potential for an OIC. 

If you have a balance due with the IRS, you should speak with an experienced tax attorney to evaluate your financial situation and the collection alternatives that may be available to you. A tax attorney can help you avoid the worry and stress associated with owing money to the IRS and can potentially assist in avoiding enforced collection action including the filing of tax liens and levies.