What to do When You Can’t Afford to Pay Your Taxes


Options for dealing with the IRS on your back taxes

Unpaid taxes

You can’t hide from the IRS. If you owe back taxes, the IRS will find your assets and use their mighty collection powers against you. Being proactive is the best strategy for avoiding painful bank account levies, wage garnishments, or tax liens.

When you owe back taxes, doing nothing is NEVER a good idea. Each letter the IRS sends to you has a purpose and usually a deadline for you to respond. You’re much better off working with the IRS than battling against them, even if you don’t have the money to pay your tax debt right now.

Make a Deal, Protect Your Assets

You may feel intimidated talking to the IRS, but the alternatives are much worse. The IRS can seize your assets without ever speaking to you, as long as they send you the right notices in the mail and give you enough time to respond.

If you aren’t sure what type of deal you should negotiate with the IRS, an experienced tax controversy attorney can help. Once you sign an IRS power of attorney form, your tax attorney can handle the majority of the process on your behalf.

Most of the deals offered by the IRS fit into one of the following categories:

Tax Debt Settlements (Offers in Compromise)

The rumors are true: The IRS does allow some taxpayers to settle tens of thousands of dollars in tax debt in exchange for a very small sum. Why would they do this?

In short, it’s a waste of resources for the IRS to try to collect from taxpayers that don’t have sufficient assets or income to pay their back taxes. They would rather write this tax debt off and focus their attention on taxpayers who have the means to make payments.

As you probably guessed, there is a catch: The IRS will only accept your Offer in Compromise if they really believe that it’s the best offer they can get. They look at your past, current, and future earning potential to make this determination. Your assets and expenses will also be looked at closely.

Read more about Offers in Compromise in our article on tax debt settlements.

IRS Payment Plans

If you have the ability to make payments, an IRS payment plan can be a great deal. You agree to make monthly payments until either your tax debt is paid off or the statute of limitations expires.

Taxpayers get two major benefits from payment plans:

  • You don’t have to pay the full amount of your tax debt right away, and
  • The IRS agrees not to take any collection actions against you

However, if you miss a payment, the IRS can once again use their collection powers against you and levy your assets. Make sure you negotiate a payment plan you will be able to afford.

Currently Not Collectible Status

Sometimes all you need is a moment to catch your breath. If you request Currently Not Collectible (CNC) status from the IRS, you will still owe all of your tax debt, but you won’t have to deal with any IRS collection actions for a while.

Once you are placed in CNC status, you can reevaluate your financial situation and consult with your tax attorney to determine your best course of action.

Schedule a Tax Debt Consultation

The experienced tax attorneys at Ayar Law Group can negotiate with the IRS on your behalf and make sure you get the best possible tax debt settlement. To schedule your tax debt consultation, contact us today by calling 248 262-3400.

Venar Ayar, Esq.

Venar Ayar, Esq.

Attorney-at-Law, Master of Laws in Taxation
Principal and founder, Ayar Law

Venar is an award-winning tax attorney ranked as a Top Lawyer in the field of Tax Law. Mr. Ayar has a Master of Laws in Taxation – the highest degree available in tax, held by only a small number of the country’s attorneys.