When you ignore IRS debt, you may have to pay penalties and fees. There can be other consequences of not paying tax debt, such as collection notices, liens, and wage garnishment.

Fortunately, the IRS offers a number of resources and programs to help you repay the taxes you owe. You can settle your debt with the IRS through an Offer in Compromise, set up a payment plan, or request penalty abatement.

How Can the IRS Help You With Tax Debt

The Internal Revenue Service (IRS) offers taxpayers a number of resources, information, tax tips, and payment options to help ease the burden of tax debt. It offers free tax preparation services (e-file and direct file) for eligible Americans every tax year.

If you owe IRS debt, you can take advantage of any of these payment options to avoid strict collection actions. The IRS also offers help in-person and over the phone if you’re not sure of your options.

The Taxpayer Bill of Rights protects your rights, and the IRS’s Taxpayer Advocate Service can help you resolve problems and offer recommendations to prevent problems in the future.

4 Ways the IRS Suggests You Pay Off Debt

The IRS offers a number of suggestions on how you can pay off your debt, depending on whether you can pay it all off at once, in installments, or if you can’t pay anything right now.

1. Payment Plans

IRS payment plans or Installment Agreements allow you to pay off your IRS debt over a period of time if you can’t pay the full amount at once.

You may be able to apply for a payment plan online if you’ve filed all your tax returns and you meet the following criteria:

  • Short-term payment plan: You owe less than $100,000 in tax debt, interest, and penalties.
  • Long-term payment plan: You owe less than $50,000 in tax debt, interest, and penalties.

You may have to pay a fee, depending on the type of payment plan you choose.

2. Offer in Compromise

If you can’t pay the full amount at once, the IRS also suggests checking to see if you qualify for an Offer in Compromise to settle your tax debt for less than you owe. You can make an offer for what you can comfortably pay, and if the IRS accepts it, you can pay a lump sum or pay in installments over 24 months.

Keep in mind that the IRS doesn’t accept tax settlement offers easily. It will evaluate your application based on your net worth and sources of credit. The IRS will also compare your income and monthly expenses to determine how much you can pay. Your financial information must prove that you’re facing financial hardship.  

3. Innocent Spouse Relief

If you owe IRS debt because your spouse understated taxes on a joint tax return and you weren’t aware of the errors, you can also apply for innocent spouse relief. You can only get this form of relief for taxes that are due on your spouse’s income from self-employment or employment.

You can’t claim tax debt relief due on:

  • Household employment taxes
  • Business taxes
  • Your own income
  • Trust fund recovery penalties
  • Individual shared responsibility payments

You may be eligible for innocent spouse relief if:

  • You filed a joint federal tax return
  • You live in a community property state
  • Your taxes are understated due to errors
  • You weren’t aware of the errors

The IRS suggests that if you receive a notice that you owe taxes on a joint return, you should follow the instructions promptly and request spouse relief.

4. Penalty Abatement

If you owe a tax penalty to the IRS, you may be able to ask for a waiver in some situations. If you’ve otherwise been a compliant filer, you may qualify for the first-time penalty abatement.

You’ll receive a letter with information about the penalty the IRS has charged. The letter will have instructions on how to request a penalty abatement. If your request is approved, you’ll receive another letter with the penalty removed.

Alternative Options for Getting Help With IRS Debt

Other than the options listed above, there are other ways to get help from the IRS.

In-Person and Phone Help

You can get help from the IRS in person and over the phone for tax debt. If you’re a low-income individual and have a tax dispute with the IRS, you can get in-person help at a Low Income Taxpayer Clinic.

Qualifying taxpayers can get educational resources as well as court and IRS representation for audits, tax collection matters, and appeals. Most services are free or available at a low cost.  

You can also call the IRS at 833-678-7020 to get help with tax debt over the phone.

Tax Bill Disagreements

If you disagree with any information on your tax bill, you can visit your local IRS office or call the number on the notice you receive. The IRS will investigate the issue and adjust your account or send a revised bill if you’re right.

You’ll need to provide information to the IRS to help prove why your tax bill is wrong. Be sure to have your tax returns, bill copy, and other records on hand.

Bankruptcy and IRS Debt

If you’ve filed for bankruptcy and owe IRS debt, contact the IRS immediately. Call 800-973-0424 or the number provided on your tax bill.

You may be asked to provide more information about your bankruptcy case, such as the chapter, bankruptcy date, bankruptcy number, and location of court. The IRS may temporarily stop collection activities if you’ve filed for bankruptcy.

Taxpayer Advocate Service

The Taxpayer Advocate Service (TAS) can help you with problems you can’t resolve with the IRS. It’s an independent organization within the IRS that ensures that taxpayers know their rights and that they’re treated fairly.

TAS advocates can help you understand IRS notices, tax laws, tax forms, and your options for dealing with them. If you can't resolve an issue related to IRS debt, contact the TAS for free assistance.

Consequences of Ignoring IRS Debt

If you have IRS debt, it’s important to take action immediately to resolve the problem. The IRS recommends you get in touch with them at the earliest opportunity to understand your payment options.

If you ignore your tax debt, the IRS will send you notices before they take any collection action. You may be placed in the Automated Collection System, which can issue liens and wage garnishments.

The IRS will also charge interest and penalties, which can add to your debt. It can seize your assets and money if you fail to repay the debt you owe.

IRS Debt and Your Tax Refund

The Treasury Department’s Bureau of Fiscal Service (BFS) is the government agency that issues tax refunds for the U.S. government. It has the authority to hold back your refund to repay the debts you owe.

If you owe state or IRS debt, the BFS can seize your refund or tax credit. The refund can be taken to offset or pay the amount due. If there’s anything left after the offset, it will be refunded to you through check or direct deposit.

For example, if you’re expecting an Ohio state tax refund of $1,000 but you owe $500 in back taxes to the IRS, the BFS can seize your refund. After paying off $500 to the IRS, you’ll receive the remaining $500 in your bank account.

Get Professional Help for IRS Debt

Owing a debt to the IRS can be stressful, but the agency offers a number of resources, information, and options to repay your debt. We recommend getting in touch with the IRS as soon as possible to determine the best way to pay off your debt.

Consider setting up an installment agreement or check to see if you qualify for an Offer in Compromise. If you’re a low-income individual, seek help from a Low Income Taxpayer Clinic.