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Your 4 Options When You Owe the IRS and Can't Pay Today

Updated: Oct 20, 2023

Will the IRS clean out my bank account? Will the IRS show up at my house? Will the IRS garnish my paycheck? They are going to throw me in jail. Will they put a lien on my property?

These questions go through your head when you open the mailbox and pull out that letter from the IRS. Your throat closes up. You start sweating under your armpits. Your feet feel like lead and you can't tell your spouse you've really messed up this time. Your chest starts to tighten because you know you can't pay it. Not now, not by the due date, and as a matter of fact, it feels like you'll never be able to pay it.

Breathe! This is not the end of the road.

If you can't pay your tax balance in full the IRS may work with you to make payment arrangements. There are actually four options to pay your tax debt and avoid having a tax lien filed against your property or your bank accounts levied (we have to protect you!). The four options are:

Installment Agreements

An installment agreement is a payment plan with the IRS. The IRS allows taxpayers to set up when they aren't able to pay their obligation in full but they can pay it over time. This is a good option for people who need more time. Be mindful that even though you now have more time this is like most payment plans, it's not free. There is a fee to set it up with the IRS and interest also accrues on the balance due.

Note: If you have a properly structured installment agreement the IRS will cut your interest rate in half. Want to make sure you don't overpay in interest and penalties? Book a call with my team at . If you owe the IRS less than $20,000, are tax compliant, and can pay the debt off in 72 months I highly recommend my e-book. Guaranteed Payment Plan will walk you through how to set up an installment agreement on your own online or on the telephone.

There are 3 types of installment agreements: Streamlined, Regular, and Partial Pay. To find out more about installment agreements check out Episode 10 of Tax Relief with Timalyn Bowens. Let's take a look at what your options are if you can't pay off the debt in the amount of time the IRS has to collect from you.

Offer in Compromise

This is the most popular option people want to pursue when they owe the IRS. However, the success rate is very low. There are so many commercials and ads now giving empty promises to settle a taxpayer's tax debt for pennies on the dollar. This is possible but not all 14 million+ tax accounts that owe the IRS will qualify for it.

You may know it better as the IRS Fresh Start Program. Although that's only part of the IRS Fresh Start Initiative Program.

An Offer in Comprise (OIC) gives taxpayer's a fresh start. It allows them to settle their tax debt for less than they actually owe. Essentially wiping the tax slate clean, good as new.

Just as with any great reward, the work is great as well! To qualify for an OIC you have to be comfortable with having the door to your finances wide open.

The first step is to complete Form 433-A to determine how much you can afford to pay. If this form is a little intimidating you can also use the IRS pre-qualifier tool. If you do qualify you'll already have Form 433-A filled out to turn in to the IRS to make your offer. After you complete your Form 433-A you may find that even the IRS agrees that you can't pay anything right now. If you have too many assets you may not qualify for an OIC. But you may qualify for currently not collectible status.

Currently Not Collectible

Currently not collectible status will protect you from IRS enforcement. You will have to prove that you have no disposable income after covering your monthly expenses. If making payments to the IRS will put you in a financial hardship you will qualify. It will give you a year of breathing time, where you will not have to make payments. Yes, you did read that correctly!

Note: Qualifying for CNC status does not resolve the debt. The liability still exists and interests continues to accrue. However, the clock continues to tick on the statute of time the IRS has to collect from you. You're protected from the IRS issuing a levy due to your balance.

Last but not least, there is bankruptcy.


Bankruptcy will not be the right choice for everyone. But it can be very effective for those that do qualify to use it to eliminate their tax debt. If there is no reasonable contribution potential, no fight with the IRS, and no appeals. Sometimes it's even cheaper than messing with Uncle Sam.

If you are considering bankruptcy to resolve your tax issues there are a few things you have to keep in mind:

  • Three-year rule

  • Two-year rule

  • 240-day rule

  • No fraud

  • No trusts taxes

  • No substitute for returns (SFR)

So what does all that mean?

The tax year that you are hoping to have discharged must be at least 3 years old. If you are a late filer it must have been on file with the IRS for at least 2 years. Any assessment by the IRS has to be at least 240 days old. The IRS doesn't make this easy.

If you are able to meet the first three requirements you're not in the clear yet. There are three more you have to meet before you can have this tax debt discharged in bankruptcy. No civil or criminal penalties due to fraud. You also cannot have any SFRs on your account. A substitute for a return is what the IRS creates when you don't have a return on file.


None of these (except for a streamlined installment agreement) are an instant solution. They will get your tax debt resolved. We want to protect you from tax liens, tax levies, and the anxiety that comes along with owing the IRS.

You have the information you need to release your fear of facing the IRS. If you don't want to fight the IRS alone you don't have to! You can find out more about these options by checking out the Tax Relief for Timalyn Bowens podcast.

Now that you have the information you need to face the IRS which option are you going to use? Let me know in the comments and don't forget to subscribe and share! Back taxes shouldn't ruin your life or your friend's either.


Timalyn S. Bowens EA is America's Favorite EA and Tax Expert who will work hard to find a customized legal solution for you! As an Enrolled Agent licensed through the Internal Revenue Service Timalyn is able to fight the IRS for taxpayers in all 50 states. As the host of Tax Relief with Timalyn Bowens and a YouTube content creator she empowers taxpayers to make educated decisions about their tax situation.

When you are facing questions regarding your personal or business taxes, working with a professional makes all the difference. At Bowens Tax Solutions, we serve our Louisville-area neighbors by providing the tax services and knowledge needed to succeed. We are here to assist you with your tax issues and preventative care. Visit our website at for more information..



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Great post very informative!

Timalyn S. Bowens
Timalyn S. Bowens
Sep 18, 2022
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Thank you Christine!

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