If you owe money to the Internal Revenue Service, there are several options to address it. IRS tax debt can accrue for several reasons, and it may happen through no fault of your own.
IRS tax debt
You may owe money to the IRS if you fail to file a tax return or do not report all sources of income on your tax return. This could include self-employment income, rental income, or investment income. The IRS may assess a penalty and interest on any amounts due. The same is true if you file a tax return, but do not pay the full amount you owe to the IRS.
It’s important to correctly claim deductions and tax credits. If you claim them and were not eligible for them, you may owe the IRS money. Sometimes, the failure to pay the IRS is due to an unforeseen financial hardship, like medical bills or a job loss.
If you do not pay the debt, the IRS can garnish your wages and place liens on your property. If you do not have the money to pay the debt in full, the IRS may accept an installment agreement, which allows you to make monthly payments.
You may be able to delay debt collection temporarily if you can demonstrate that you are facing financial hardship. Also, the IRS allows taxpayers to settle their debt for less than the full amount through a program called an Offer in Compromise (OIC). An OIC may involve a deeper financial assessment of what you can pay.
In some situations, you may be able to appeal an IRS tax decision and reduce your tax debt.