If you owe federal taxes and cannot pay the full balance at once, there may be more than one way to address the debt.
The IRS provides several options for taxpayers who are having trouble paying, including monthly payment plans, Offers in Compromise, temporary collection delays and penalty relief. The right option depends on factors such as how much you owe, your income, expenses, assets and ability to pay.
Review Tax Debt Options
What Tax Debt Options Are Available?
Tax debt relief is not one single program.
It is a general term used to describe different ways taxpayers may be able to manage or resolve money owed to the IRS.
Common options include:
- IRS payment plans
- Offer in Compromise
- Temporary delay of collection
- Penalty relief
- Paying part or all of the balance
At a Glance
| Tax Debt Option | What It Does |
| Payment Plan | Spreads payments over time |
| Offer in Compromise | May settle qualifying debt for less than the full balance |
| Collection Delay | May temporarily pause certain collection activity |
| Penalty Relief | May reduce or remove qualifying penalties |
| Direct Payment | Reduces the outstanding balance |
The IRS also offers an online Tax Debt Help tool that asks questions about a taxpayer’s situation and points to possible resolution options.
What Is Tax Debt Relief?
Tax debt relief can refer to several IRS-approved ways of handling unpaid federal taxes.
Some people may simply need additional time to pay.
Others may be dealing with a financial hardship that makes even a monthly payment difficult.
In certain situations, a taxpayer may qualify to settle a tax balance for less than the total amount owed.
The important thing to understand is that tax debt does not automatically disappear.
Each IRS option has its own rules and requirements.
Start With How Much You Owe
The size of your tax balance can affect which options are easiest to request online and what information the IRS may ask you to provide.
Under $5,000
A relatively smaller balance may be easier to address through payments over time.
$5,000–$10,000
A monthly payment arrangement may still be worth reviewing if paying the entire balance at once would strain your budget.
$10,000–$25,000
At this level, taxpayers may want to compare monthly payments with other IRS resolution options.
$25,000–$50,000
The IRS may allow qualifying individuals to apply online for a long-term installment agreement when the total balance is $50,000 or less.
Over $50,000
Additional information or different procedures may be required depending on the circumstances.
See Ways to Handle IRS Debt
IRS Payment Plans
A payment plan can allow a taxpayer to pay an IRS balance over time instead of making one large payment.
There are both short-term and long-term arrangements.
Short-Term Payment Plans
A short-term payment plan may be available when the combined amount of tax, penalties and interest is less than $100,000.
These plans can generally provide up to 180 days to pay.
The IRS currently does not charge a setup fee for a short-term plan, although interest and applicable penalties continue until the balance is fully paid.
Long-Term Payment Plans
A long-term installment agreement allows the balance to be paid through monthly payments.
Individuals who owe $50,000 or less in combined tax, penalties and interest may generally apply online.
Setup fees can apply, although qualifying lower-income taxpayers may receive reduced or waived fees.
Does Interest Stop During a Payment Plan?
No.
Interest and applicable late-payment penalties generally continue to be added to the unpaid balance until it is paid in full.
Review IRS Payment Plans
Can the IRS Settle Tax Debt for Less?
In some situations, yes.
An Offer in Compromise, often called an OIC, is an agreement that allows a qualifying taxpayer to settle IRS tax debt for less than the full amount owed.
This does not mean everyone with tax debt can negotiate a lower balance.
The IRS considers the taxpayer’s financial situation before deciding whether an offer is appropriate.
What Does the IRS Look At?
Factors can include:
- Income
- Monthly living expenses
- Bank accounts
- Real estate
- Vehicles
- Other assets
- Equity in property
- Expected future income
- Overall ability to pay
The IRS uses these factors to estimate what it calls the taxpayer’s reasonable collection potential.
If the IRS believes the taxpayer can reasonably pay the full balance through an installment agreement or another method, an Offer in Compromise generally will not be approved.
Who May Be Able to Apply for an Offer in Compromise?
Before the IRS considers an Offer in Compromise, taxpayers generally must have:
- Filed all required tax returns
- Received a bill for at least one tax debt included in the offer
- Made required estimated tax payments for the current year
Business owners with employees also have additional federal tax-deposit requirements.
Taxpayers in an open bankruptcy proceeding are generally not eligible to submit an Offer in Compromise.
Could Your Situation Be Worth Reviewing?
Consider questions such as:
Can you afford to pay the entire IRS balance now?
Would paying the balance make it difficult to cover basic living expenses?
Have all required tax returns been filed?
Do you have income, savings or other assets that could be used toward the debt?
The answers can affect which IRS resolution options may be worth exploring.
Review IRS Resolution Options
Does an Offer in Compromise Cost Money to Apply?
In many cases, yes.
The standard IRS Offer in Compromise application currently includes a $205 application fee along with an initial payment.
However, taxpayers who meet the IRS low-income certification guidelines generally do not have to submit the application fee or the initial payment.
Lump-Sum Cash Offer
With this option, the taxpayer generally submits 20% of the proposed offer amount with the application.
If the IRS accepts the offer, the remaining balance of the agreed amount must be paid according to the applicable rules.
Periodic Payment Offer
The taxpayer generally submits an initial payment and continues making monthly payments while the IRS reviews the application.
Low-income certification can change some of these payment requirements.
What If You Cannot Afford Any IRS Payment Right Now?
Some taxpayers are in a financial position where even a monthly payment would make it difficult to pay for basic necessities.
In those cases, the IRS may consider temporarily delaying collection.
This is often referred to as currently not collectible status.
The IRS may ask for financial information showing:
- Income
- Monthly expenses
- Assets
- Bank balances
- Other financial obligations
If the IRS determines that the taxpayer cannot currently pay because of financial hardship, certain collection activity may be temporarily delayed.
Does Currently Not Collectible Status Erase the Debt?
No.
The tax balance still exists.
Interest and applicable penalties can continue to build, and the IRS may periodically review whether the taxpayer’s financial condition has improved.
A federal tax lien may also still be filed in some circumstances.
Could IRS Penalties Be Reduced?
Potentially.
The IRS provides several forms of penalty relief for taxpayers who meet certain requirements.
Reasonable Cause Relief
Certain penalties may be reduced or removed when a taxpayer can show that they exercised ordinary care but were still unable to file or pay on time.
The IRS reviews reasonable-cause requests based on the facts and circumstances of each case.
New Automatic Penalty Relief for 2026
The IRS began transitioning in summer 2026 from its long-standing First Time Abate process toward a new system called Automatic Exemption from Penalty.
The new process can automatically prevent certain penalties from being assessed for taxpayers who meet the applicable compliance-history requirements.
Important
Penalty relief does not necessarily remove the underlying tax balance.
It generally applies only to qualifying penalties.
What Happens If Tax Debt Is Left Unpaid?
Ignoring IRS notices does not make the balance go away.
Interest generally continues to accrue, and additional penalties may apply.
Depending on the circumstances, unpaid federal tax debt can also lead to collection actions such as:
- Future tax refunds being applied to the balance
- Federal tax liens
- Levies
- Additional IRS notices
Certain seriously delinquent federal tax debts can also affect the issuance or renewal of a U.S. passport.
Reviewing available options earlier may give taxpayers more ways to address the balance before the situation becomes more complicated.
Tax Debt Is Different From Other Types of Debt
IRS tax debt does not work exactly like a credit card balance, personal loan or medical bill.
IRS Tax Debt
- Owed to the federal government
- IRS collection rules apply
- Payment plans may be available
- Federal tax liens or levies may apply
- Offer in Compromise rules may apply
Credit Card Debt
- Owed to a bank or card issuer
- Interest rates depend on the account
- Debt-settlement procedures are different
- Collection rules differ from IRS debt
Personal Loans
- Usually repaid through fixed monthly payments
- Interest rates depend on the borrower and lender
- Loan terms are set by the lender
- Federal tax collection rules do not apply
Because these debts work differently, a strategy that makes sense for credit cards may not make sense for taxes.
Should You Handle IRS Debt Yourself?
Some tax debt problems can be handled directly with the IRS.
For example, many taxpayers can apply for an installment agreement through IRS.gov without hiring a company.
More complicated situations may involve:
- Several years of unpaid taxes
- Missing tax returns
- Large tax balances
- IRS liens
- IRS levies
- Business tax problems
- Disputes over the amount owed
- Offer in Compromise applications
In those situations, some taxpayers choose to speak with a professional who can represent them before the IRS.
Who Can Help With Tax Debt?
Professionals who may be able to represent taxpayers before the IRS include:
Enrolled Agents
Enrolled agents are federally authorized tax professionals who may represent taxpayers before the IRS.
Certified Public Accountants
CPAs may provide tax preparation, financial and tax-resolution services depending on their practice.
Tax Attorneys
Tax attorneys may assist with complex tax matters, disputes, litigation and other legal issues.
The type of professional that makes sense depends on the complexity of the tax problem.
What About Tax Relief Companies?
Tax relief companies often advertise services for consumers who owe the IRS.
Some may assist with tasks such as:
- Reviewing IRS notices
- Preparing unfiled returns
- Applying for payment arrangements
- Preparing an Offer in Compromise
- Communicating with the IRS
- Responding to liens or levies
However, hiring a tax relief company does not guarantee that the IRS will reduce a tax balance.
Be Careful With Guarantees
Claims such as “settle your IRS debt for pennies on the dollar” should not be treated as a guarantee.
Offer in Compromise approval depends on the taxpayer’s actual finances and IRS rules.
Questions to Ask a Tax Relief Company
Before paying a company to help with IRS debt, consider asking:
- Who will work on my case?
- Can that person represent taxpayers before the IRS?
- What services are included in the quoted fee?
- Are there additional charges?
- What IRS option are you recommending?
- Why do you believe that option fits my situation?
- What happens if the IRS does not approve it?
- Can I complete this process directly with the IRS?
- Are you guaranteeing a specific result?
Understanding the service before paying can make it easier to compare providers.
Other Financial Options to Review
Tax debt is often only one part of a household’s overall financial picture.
Review Your Monthly Budget
Listing income and essential expenses can help show what amount may realistically be available for an IRS payment.
Build Emergency Savings
Even a small cash reserve can make it easier to handle unexpected expenses without adding new high-interest debt.
Review High-Interest Debt
Credit cards and other high-interest balances can compete with tax payments for room in a household budget.
Compare Debt Consolidation Options
Some consumers explore ways to combine multiple consumer debts into one payment.
Debt consolidation does not automatically reduce the amount owed, and borrowing costs should always be compared carefully.
Compare Personal Loans Carefully
Some people consider using a loan to pay taxes.
Before doing so, compare the loan’s:
- Interest rate
- Monthly payment
- Origination fees
- Repayment term
- Total cost
A lower monthly payment does not always mean a lower total cost.
Frequently Asked Questions
Can IRS tax debt really be settled for less?
Yes, in qualifying situations.
An Offer in Compromise allows the IRS and a taxpayer to agree on a reduced amount, but approval depends on the person’s financial circumstances.
Does everyone qualify for an Offer in Compromise?
No.
The IRS generally will not approve an Offer in Compromise when it believes the taxpayer can fully pay the debt through an installment agreement or other available means.
Can I make monthly payments to the IRS?
Potentially.
IRS installment agreements allow qualifying taxpayers to pay their balances over time.
How much can I owe and still apply for an online payment plan?
Individuals who owe $50,000 or less may generally apply online for a long-term payment plan.
Short-term online payment plans may be available when the total combined balance is less than $100,000.
What if I cannot afford any payment?
The IRS may temporarily delay collection if paying the debt would prevent you from meeting necessary living expenses.
Approval depends on a review of your financial circumstances.
Does a collection delay make the tax debt disappear?
No.
The balance remains, and interest and applicable penalties may continue.
Can IRS penalties be removed?
Some taxpayers may qualify for penalty relief based on reasonable cause or administrative relief.
The IRS also began transitioning to a new Automatic Exemption from Penalty process in summer 2026.
Do I need to hire a tax relief company?
Not necessarily.
Many taxpayers can use IRS.gov to review and request payment options directly.
More complicated situations may make professional assistance useful.
Can a company guarantee that my IRS debt will be reduced?
No company can guarantee that the IRS will approve an Offer in Compromise or another reduction.
The IRS makes the final decision based on the taxpayer’s circumstances.
Owe the IRS and Can’t Pay Everything at Once?
There may be several ways to manage federal tax debt.
Depending on your situation, you may want to review:
IRS Payment Plans
Offer in Compromise
Temporary Collection Delays
Penalty Relief
The right approach depends on the balance you owe and your financial circumstances.
Review Your Tax Debt Options
This website provides general informational content and is not the IRS, a government agency, tax adviser or law firm. Tax rules and IRS procedures can change. Review current IRS information or speak with a qualified tax professional before making tax or financial decisions.
