Dealing with Tax Debt

How can I pay my IRS debt?

If you can pay your tax bill all at once – or with just a short delay – there are many options. Click on each link below to learn more:

• Cash – If you make a payment in cash, you may go to one of the retail partner locations. You may not pay more than $500 in cash. When you pay in cash, avoid penalties and interest charges by making the payment at least seven business days before your due date. You can also buy a prepaid credit card and pay online or through the IRS2Go mobile app.
• Check or money order – You may pay by personal check, cashier’s check or money order.
• Direct debit from your bank account – You may make a payment directly from your bank account.
• Debit or credit card or digital wallet – If you make a payment with your credit or debit card, your card will be charged a service fee.
• Same-day wire – If you wish to make a payment using a same-day wire, contact your bank to see the availability, cost, and cut-off times.

What if I can pay all of it but not all at once?

If you have the means to pay, but not in one transaction, you have the option to set up an installment agreement with the IRS to spread out your payments over several months or years.

The IRS will charge a fee for setting up the agreement unless: (1) your income is below 250% of the federal poverty line and you agree to direct debits from your bank account, or (2) you agree to pay off all the debt within 180 days.

To learn more about installment agreements, click here and here.

What if I can’t pay any of this now – or maybe ever?

If payments to the IRS would subject you to “financial hardship,” you have two options:

• Request currently-not-collectible status
• Submit an offer in compromise

Currently-not-collectible status spares your property and bank accounts from collection action but doesn’t get rid of the tax debt. Interest and penalties continue to accrue, and the IRS can still “take” your refund. You can stay in this status indefinitely, however, unless your income increases enough for you to start making payments.

You can request currently-not-collectible status by calling (800) 829-1040 or by mailing a financial statement to the IRS. If you live in New Hampshire, mail to:

Internal Revenue Service Center
Kansas City, MO 64999-0010

The statement requires you to list all your assets, debts, income, and expenses. If your finances meet the IRS definition of “financial hardship,” the IRS will grant your request – often without any documentation required.

To learn more about currently-not-collectible status, click here.

Also, keep in mind that the IRS generally has only ten years to collect on your debt, starting from the date the IRS finishes processing your tax return. After that, the IRS can’t collect against you, even if you win the lottery.

HOWEVER, be aware that some things can temporarily “pause” the ten-year clock. These include filing for bankruptcy, requesting an installment agreement, submitting an offer in compromise, requesting a collection due process hearing, or filing an innocent spouse claim.

To learn more about the “collection statute expiration date,” click here.

An offer in compromise can get rid of the actual debt, as well as any federal tax liens in your name. By filing an offer in compromise, you’re asking the IRS to settle your debt for whatever you’re able to spare without suffering “financial hardship.” The offer in compromise submission must include a detailed financial statement and documentation of your assets, debts, income, and expenses.

For more information about offers in compromise, click here.

Am I responsible for taxes my spouse or former spouse owes?

This article explains how Innocent Spouse Relief can help protect a husband or wife who was not aware their spouse was not properly paying taxes, from being liable for their spouse’s actions.

It also explains the 3 different types of relief available to innocent spouses.

Use the Innocent Spouse Online Self-Help Tool from the IRS to see if you are eligible for Innocent Spouse Relief.

• Apply for Innocent Spouse Relief from the IRS

Need help applying or has the IRS denied your request for Innocent Spouse Relief? Apply for help from the Low Income Taxpayer Project by calling 603 Legal Aid at 603-224-3333 or apply online.

What if I need help?

If you’d like assistance handling your IRS debt, apply for help from the Low-Income Taxpayer Project here or from the Taxpayer Advocate Service here.