IRS Payment Options for Back Taxes: What To Do When You Can’t Pay

As tax season wraps up, Americans often find themselves in one of two camps: those dreaming about what to do with their refund — and those who are losing sleep over a tax bill. Many taxpayers avoid filing because they fear what they’ll owe, but that just adds penalties and interest to the problem. Perhaps they received a notice from the IRS and don’t know how they can possibly pay . Fortunately, there are several IRS payment options and alternatives for taxpayers who want to get caught up, but need some flexibility. If you owe the IRS and can’t pay, keep reading.

Here’s a straightforward breakdown of your best options:

Options to Pay the IRS

1. Pay in Full

This is the most straightforward of all IRS payment options: If you CAN afford to pay your full balance, do it. You’ll avoid additional interest and penalties. And the IRS is a terrible creditor!

The IRS accepts payments via:

Direct Pay (bank account)
Debit/credit card
Digital wallet
Same-Day Wire
Check or money order
Cash at retail partners
Electronic Funds Withdrawal, available only when e-filing

2. Set Up a Payment Plan (Installment Agreement)

This is one of the most common IRS payment options. If you can’t pay in full, consider applying for an installment agreement online or by phone by calling 1-800-829-1040.

Short-Term Payment Plan
For debts under $100,000 (tax + interest + penalties)
Must pay within 180 days
No setup fee
Interest and penalties continue to accrue
Long-Term Installment Agreement
For balances under $50,000
You must be current on all required filings
Apply through the Online Payment Agreement tool or by filing Form 9465
Fees: $31 (auto-debit), $130 (non-auto)
Guaranteed Installment Agreement
All returns filed: Must be in filing compliance
No prior installment plans: In the past 5 years
Pay within 3 years: Taxpayer must pay the full balance within 36 months
No bankruptcy: Taxpayer is not in bankruptcy
You can usually do this one on your own – it’s really simple.

⚠️ Important: The IRS will often void payment agreements if taxpayers miss filing a future return or fail to make a payment.

3. Settle for Less with an Offer in Compromise (OIC)

An Offer in Compromise lets you settle your IRS debt for less than the full amount — if you qualify. This is a last-ditch before bankruptcy and the IRS does not approve many of these because they are complex and many taxpayers do not follow the guidelines. Also, the process is highly scrutinized, so taxpayers should consider getting help from a qualified tax resolution expert.

You can use the  Offer in Compromise Pre-Qualifier Tool to check your eligibility and prepare a preliminary proposal.

OIC Eligibility Requirements

You must:
Have filed all required returns and made all estimated payments
Not be in bankruptcy
Meet deposit requirements (if an employer)
Payment Options:
Lump Sum: Pay 20% upfront; remainder due in 5 or fewer payments
Periodic Payment: Pay your monthly offer amount while the IRS considers your offer

Taxpayers who can’t pay back taxes can find step by step instructions Form 656-B. Applicants must file a $205 non-refundable application fee when filing this form as well as a non-refundable initial payment for each Form 656.

📌 While the IRS evaluates your OIC:

The IRS will apply your payments to your balance
The IRS will pause collectionIRS may file a tax lien
Statute of limitations is extended

If the IRS doesn’t decide within 2 years, they will automatically accept the offer (unless appealed).

4. Request Temporary Hardship Status (Currently Not Collectible)

If you genuinely can’t afford to pay anything, the IRS may classify your account as currently not collectible (CNC). This delays collection but does not forgive the debt — interest and penalties still accrue.

To qualify:
You’ll need to submit Form Form 433-F, Form 433-A or Form 433-B with documentation of income, expenses, and assets.
The IRS may still file a Notice of Federal Tax Lien.

Tip: You will want to take great care to fill out this form properly and completely. A tax professional can assist you with this as there are rules on when national standards can/should be used as apposed to actual expenses. You should also know that if the IRS does delay collecting from you, your debt will increase because penalties and interest are charged until you pay the full amount. During the temporary delay, the IRS will again review your ability to pay.

5. Spousal Relief Options

There are two key types of spousal relief:

Injured Spouse Relief

You may recover your portion of a joint refund if it was used to pay your spouse’s past-due debt (e.g., child support, student loans, back taxes).

File Form 8379 within 3 years of filing the return. It will be very important to follow the Form 8379 instructions carefully and attach all required forms such as W-2s and 1099s. You must file a new Form 8379 for each year when you want to reclaim a refund.

The IRS often takes us up to 8 weeks to process Form 8379 by itself and longer if you file it with your tax return.

Innocent Spouse Relief

-You may qualify for this relief if:

You filed jointly
Your spouse understated income or claimed improper deductions
You had no knowledge of the errors

File Form 8857 within 2 years of receiving an IRS notice. After you file it, the IRS will review your request and contact your spouse or former spouse to ask if they want to participate in the process. This may take up to 6 months or longer to review your request.

Relief is denied if:

You signed an Offer in Compromise or closing agreement covering the same taxes
You knew (or should’ve known) about the errors

Relief may still apply in cases of abuse, coercion, or domestic violence.

Final Thoughts

Owing the IRS doesn’t mean the end of the world. But ignoring the problem will make it worse. You have several IRS payment options available to you. Some are simple. Others require professional help.

We know the IRS from the inside — and we help clients navigate their options every day. Schedule a free 30-minute consultation today:

👉 https://boon.tax/book-now/

Disclaimer

The content on this blog is for informational and educational purposes only and should not be considered as specific tax, legal, or financial advice. Tax matters are highly individualized and depend on various factors unique to each situation. While we strive to provide accurate and timely information, it is essential to remember that the tax code is complex and constantly changing. Before making any decisions or taking action based on the information provided here, please consult with a qualified tax professional who can analyze your specific circumstances and offer tailored advice. The author and publisher disclaim any liability for actions taken based on the content of this blog without seeking professional guidance.