Owe Taxes and Cannot Pay? Your Options

If you cannot pay, file your return on time anyway and contact the agency about your options, because silence tends to make the situation harder.

Owing more than you can pay is common, and the IRS and the Alabama Department of Revenue both have processes for it.  What tends to cause real trouble is silence: not filing, not responding and not opening the mail.  Interest and penalties can grow while a balance sits unpaid, and unanswered notices can lead to collection actions.

The rest of this page walks through the usual steps.  It is general information, and the right choice depends on your income, expenses and how much you owe.

The IRS offers several ways to pay over time or, in narrow cases, to resolve a balance for less, and each has its own requirements.

The most common option is a payment plan, also called an installment agreement, which lets you pay in monthly amounts.  Our guide to IRS payment plans explains how they work.  An offer in compromise, which is different and much harder to qualify for, is covered in offer in compromise explained. In some hardship cases, the IRS may temporarily delay collection.

Interest and penalties can continue to build while you pay over time.  Which option fits depends on the amount owed, your finances and your filing history, and we cannot promise which one the IRS will accept.

The IRS decides eligibility in each case.

Do not ignore any notice that mentions a levy or garnishment, because there is a deadline to respond.

Collection does not usually start without warning letters.  If you have already received one, keep a copy and call us right away.  Our page on tax levies and wage garnishment explains what the notices mean.