Optima Tax Relief’s Chief Tax Officer and Lead Tax Attorney, Phil, answers a common question: “I just got a bill from the IRS. What are my options?” While the answer depends on your financial situation and the amount you owe, there are several ways to address an IRS tax liability.
Option 1: Pay in Full
If you can afford to pay your balance in full, this is generally the best option. Paying sooner can help minimize the penalties and interest that continue to accrue on unpaid tax debt.
Option 2: Short-Term Payment Plan
Taxpayers may be able to request a short-term payment plan of up to 180 days without a setup fee. However, penalties and interest will continue to accrue until the balance is paid.
Option 3: Installment Agreement
An installment agreement allows you to make monthly payments toward your tax debt over time, potentially for up to 10 years. It can also reduce the failure-to-pay penalty in half, although interest and remaining penalties continue to accrue. Depending on how much you owe, the IRS may file a tax lien against you and your assets.
Option 4: Partial Pay Installment Agreement
A partial pay installment agreement allows eligible taxpayers to pay less than their total tax debt. Payments are based on their ability to pay, but taxpayers must provide detailed financial information and demonstrate that they qualify. The IRS may file a tax lien against you and your assets.
Option 5: Currently Not Collectible Status
If you’re experiencing financial hardship, you may qualify for Currently Not Collectible status, which temporarily pauses most IRS collection activity. However, you’ll need to provide full financial information, and the IRS may file a tax lien against you and your assets.
Don’t Choose Option 6: Do Nothing
Ignoring your tax debt is not a solution. If you don’t address your balance, the IRS can take serious collection actions, including levies, wage garnishments, asset seizures, and passport restrictions.
Take Action Before the IRS Does
The right option depends on your individual circumstances, but the most important thing is to do something. Understanding your options and addressing your tax debt early can help you avoid more aggressive IRS collection actions.
If you need tax help, contact us today for a Free Consultation