If you owe IRS money you cannot pay, you have more options than you think, and none of them require panicking. If you’re asking yourself, “I owe the IRS money, what do I do?” the first step is figuring out how you ended up with the tax debt so you can determine the best way forward.
Whether the tax you owe came from an unexpected tax bill, missed payments, or an ongoing issue, addressing it early can help you take back control. Depending on your situation, tax relief services can also help you understand your options and find the right resolution strategy for your situation.
Step One: Figure Out Why You Owe the IRS
Before choosing a resolution strategy, figure out why you owe the IRS in the first place. Did you miss tax payments, fail to set aside enough of your income for taxes, or receive an unexpected bill? Understanding whether your tax debt resulted from a one-time event or an ongoing issue can help you address the underlying problem and avoid owing again.
Do Not Ignore It (Here Is Why)
Once you understand why you owe taxes, the next step is to address the debt rather than ignore it. Unpaid balances can accrue a failure-to-pay penalty of 0.5% per month, up to 25% of the unpaid tax, in addition to interest, which is currently 7% annually for individuals in Q3 2026 and adjusted quarterly. Ignoring IRS notices can move your account closer to enforced IRS debt collection, so make sure to respond and communicate with the IRS as early as possible.
Your Payment Options If You Can’t Pay Taxes in Full
If you can’t pay taxes in full, the IRS offers payment options that can give you more time. A short-term payment plan allows you up to 180 days to pay if you owe less than $100,000 in combined tax, penalties, and interest, with no setup fee. If you owe $50,000 or less and have filed all required tax returns, you may qualify for a long-term IRS payment plan, or installment agreement, with a $29 setup fee when using direct debit.
Keep in mind that penalties and interest will continue to accrue while you’re making payments. Options such as an offer in compromise or hardship status may be worth looking at with a tax professional to determine which options are available for your circumstances.
When to Bring In a Tax Professional
If you owe a relatively small balance that you can realistically pay off within a few months, you may be able to handle the situation on your own. However, if you owe taxes from multiple years, have been contacted by a revenue officer, are facing liens or levies, or can’t afford to pay your balance, professional representation can make a difference. At Boxelder, you’ll speak with a licensed tax attorney or CPA, not a salesperson. Contact us to discuss your tax situation and determine your next steps.
Disclaimer: This content is for informational purposes only and should not be considered tax, legal, or financial advice. Every tax situation is different. Consult a qualified tax professional regarding your specific circumstances.
