You did everything right. You filed on time. And then you opened the return and saw a number you weren’t expecting: a balance due you don’t have sitting in a checking account.
First, you’re not alone, and you’re not in as much trouble as it probably feels right now. The IRS has specific programs built for exactly this situation, and knowing your options makes a significant difference in how much you ultimately pay and how quickly this gets resolved.
Here’s what to do, and what not to do.
The Most Expensive Thing You Can Do Is Nothing
Do not ignore a tax balance. This is the single biggest mistake people make, and it’s understandable. When a problem feels too big to face, it’s easy to put it in a drawer and hope it goes away.
It doesn’t go away. It grows.
The IRS charges a failure-to-pay penalty of 0.5% of your unpaid balance every month, plus interest on top of that. If you also failed to file your return, the failure-to-file penalty is 5% per month, ten times worse. The IRS will eventually contact you, and by then the original balance will have grown considerably.
There is good news here. Once you’re in an active payment arrangement, the failure-to-pay penalty drops from 0.5% to 0.25% per month. Taking action immediately is always cheaper than waiting.
You Have More Options Than You Think
Short-Term Payment Plan
If you can pay the full amount within 180 days, this is the simplest path. The IRS offers a short-term payment plan for taxpayers who owe less than $100,000 in combined tax, penalties, and interest. There’s no setup fee, and you can apply online in minutes through the IRS Online Payment Agreement tool. Interest continues to accrue, but you’ll pay far less overall than with a multi-year plan.
Installment Agreement
If you need more time, a long-term IRS installment agreement lets you make monthly payments over an extended period. For individual taxpayers with a balance under $50,000, the Simple Payment Plan allows monthly payments for up to ten years. You can set this up online, and approval is often immediate. Once an installment agreement is in place, the IRS is generally prohibited from levying your wages or bank accounts while the agreement is active.
Offer in Compromise
If your financial situation genuinely can’t support full repayment, an Offer in Compromise allows you to settle your tax debt for less than the full amount owed. The IRS evaluates your income, expenses, assets, and ability to pay before approving one. It’s not a guaranteed outcome and it takes time, but for people facing real financial hardship, it can dramatically reduce what they owe.
Currently Not Collectible Status
If you simply cannot pay anything right now without being unable to cover basic living expenses, you may qualify for Currently Not Collectible status. This doesn’t erase the debt, but it temporarily pauses IRS collection activity while you get back on your feet. The IRS reviews the status periodically, so this is typically a bridge solution rather than a permanent one.
Penalty Abatement
If this is your first time owing or you have a clean compliance history, you may qualify for first-time penalty abatement. This removes certain penalties from your balance entirely. It won’t eliminate the underlying tax owed, but it can meaningfully reduce the total amount due. Many taxpayers don’t know this option exists.
Should You Handle This Yourself or Get Help?
For straightforward situations, setting up a payment plan online through the IRS is genuinely easy and takes about ten minutes. If you owe under $50,000 and have a stable income, you can likely handle it on your own.
But if your balance is large, your financial situation is complicated, or you’re worried about your assets being at risk, working with a tax attorney is worth it. The options above, particularly Offer in Compromise and Currently Not Collectible status, require a detailed financial analysis and a strong understanding of IRS collections procedure to navigate well. Getting the wrong outcome costs significantly more than professional help would have.
Boxelder’s tax relief team includes licensed IRS collections defense attorneys who handle exactly these situations. We’ve worked with clients at every level of tax debt and know how to identify the best path forward based on your specific numbers and circumstances.
The Bottom Line
Owing the IRS is stressful, but it’s a solvable problem. The IRS would rather work out a payment arrangement than chase you indefinitely, and the programs exist to make that happen. What makes the situation worse is time. Every month you wait adds penalties and interest to the balance.
If you filed and owe more than you can pay, don’t wait for a notice in the mail. Get ahead of it.
Schedule a free consultation with a Boxelder tax attorney and we’ll walk you through your options before the IRS comes looking.
