You've gathered your records, prepared your missing tax returns, and finally know where you stand.
But now there's another problem:
You owe the IRS more than you can afford to pay.
For many taxpayers, this is exactly why they avoided filing in the first place. They assumed there was no point in filing a return if they couldn't pay the tax.
But filing and paying are two separate issues.
Even if you cannot pay your tax debt in full, getting your required tax returns filed is an important step toward becoming compliant—and it may be necessary before certain IRS resolution options are available.
The important thing now is to understand your financial situation and determine what options may be available.
If you cannot pay your IRS balance in full:
The IRS has several ways of addressing tax debt when a taxpayer cannot immediately pay the entire balance.
Which option is appropriate depends on your individual circumstances.
You don't have to be able to pay your entire tax bill before filing your returns.
Get the required returns filed, determine what you actually owe, and then evaluate the payment or resolution options available for your situation.
Depending on your circumstances, IRS tax debt may be addressed in several ways.
Payment Plan / Installment Agreement
An installment agreement allows qualifying taxpayers to pay their IRS balance over time rather than paying the entire amount immediately.
The type of agreement available can depend on factors such as:
For some taxpayers, a payment plan is the most straightforward way to resolve a balance.
Currently Not Collectible (CNC)
If paying the IRS would prevent you from meeting necessary living expenses, the IRS may determine that you are currently unable to pay.
In qualifying situations, the IRS may temporarily delay collection and place the account in Currently Not Collectible (CNC)status.
CNC does not erase the tax debt.
The balance remains due, penalties and interest may continue to accrue, and the IRS may review your financial condition later to determine whether your ability to pay has improved.
Offer in Compromise (OIC)
An Offer in Compromise may allow a qualifying taxpayer to settle IRS tax debt for less than the full amount owed.
However, an OIC is not available simply because someone owes more than they can comfortably pay.
The IRS considers factors including:
An Offer in Compromise can be an important resolution tool for taxpayers who qualify, but it is not the right solution for everyone.
Being unable to pay your tax debt today does not necessarily mean you have no options.
But the IRS generally needs an accurate picture of your situation before determining what resolution may be appropriate.
That may include reviewing your:
The solution should fit the taxpayer's actual financial circumstances, not simply the amount of tax owed.
One of the biggest mistakes taxpayers make is starting with:
"I want an Offer in Compromise."
A better question is:
"Based on my financial situation, what resolution option actually fits?"
The amount you owe is only part of the equation.
Your income, necessary expenses, assets, ability to pay, and future financial circumstances can all affect the appropriate resolution strategy.
Start with the financial facts. Then choose the solution.
Don't stop filing tax returns simply because you already owe the IRS.
Creating new compliance problems can make resolving an existing tax debt more difficult.
Getting caught up is only part of the process.
Staying current matters too.
If you've filed your required returns but cannot pay the balance in full:
You don't need to choose a resolution option simply because you've heard about it.
The goal is to find the option that actually fits your circumstances.
No.
Filing your required tax returns and paying the resulting tax debt are separate issues. You may still owe money after becoming current with your filing obligations.
Possibly.
The IRS offers payment plans for qualifying taxpayers who cannot pay their balance in full immediately. The requirements depend on the amount owed and other circumstances.
If paying the IRS would prevent you from meeting necessary living expenses, you may qualify for a temporary delay in collection, often referred to as Currently Not Collectible status.
The IRS may require detailed financial information before making that determination.
No.
CNC temporarily delays most collection activities due to financial hardship. The tax debt remains, and penalties and interest may continue to accrue.
Possibly.
An Offer in Compromise allows certain qualifying taxpayers to settle tax debt for less than the full amount owed. Qualification depends on the taxpayer's financial circumstances and other IRS requirements.
No.
An OIC is only one IRS resolution option. Before applying, it's important to determine whether you qualify and whether another resolution method would be more appropriate.
Don't ignore it.
Read the notice carefully, identify any deadlines, and determine what action is required. Some collection notices provide important response or appeal rights.
✅ Haven't Filed Tax Returns? Here's Where to Start
✅ How Many Years of Tax Returns Do You Need to File?
✅ What Happens If You Don't File Your Tax Returns?
✅ What Is a Substitute for Return (SFR)?
✅ How Do I Get My IRS Tax Records?
✅ How Do I File My Missing Tax Returns?
✅ What If I Can't Pay My Tax Debt? (You are here)
➡️ You're Back in Compliance—Now What? Our tax preparation services are designed to help your business stay compliant and reduce your tax liabilities. We work with you to ensure that your taxes are filed accurately and in a timely manner.
Discovering that you owe more than you can afford to pay can be discouraging, but it does not mean you're out of options.
The IRS has different ways of addressing tax debt depending on a taxpayer's ability to pay and financial circumstances.
The important steps are to:
File the required returns.
Determine the correct balance.
Understand your financial situation.
Evaluate the appropriate resolution options.
And most importantly, continue to stay current with your tax obligations while addressing prior-year debt.
Compliance Stage Status
✅ Haven't Filed Tax Returns? Completed
✅ Determine How Many Years to File Completed
✅ Understand the Consequences of Not Filing Completed
✅ Learn About Substitute for Return (SFR) Completed
✅ Obtain IRS Tax Records Completed
✅ File Your Missing Tax Returns Completed
⏳ Resolve Any Remaining Tax Debt You are here
⏳ Stay Current Going Forward Next Step
Getting your returns filed is a major milestone. Now the focus shifts to addressing any remaining tax debt and staying compliant going forward.
If your returns are filed but you cannot pay the balance in full, determining the right resolution option can be difficult.
An Enrolled Agent (EA) can help you:
The goal isn't simply to choose an IRS program.
It's to develop a resolution strategy based on your actual financial circumstances.
This article is provided for educational purposes only and should not be considered legal or tax advice. Eligibility for IRS payment and resolution programs depends on the taxpayer's specific facts and circumstances and applicable IRS requirements. If you need advice regarding your situation, consult a qualified tax professional.
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