Quick action steps (do these first)

  • File all required tax returns immediately. The IRS won’t approve most payment options if returns are not filed (IRS).
  • Don’t ignore the bill: interest and penalties continue to accrue and collection actions can begin.
  • Contact the IRS or a qualified tax pro to discuss payment options before a levy or lien is issued.

Short-term options explained

1) Installment agreement (monthly payments)

  • What it is: An arrangement to pay your tax balance in monthly installments while avoiding enforced collection (levy).
  • Who typically qualifies: Taxpayers who are current with filing and tax compliance. If you owe $50,000 or less in combined tax, penalties, and interest, you can usually apply online for a streamlined long‑term payment plan; larger balances require more documentation. (IRS: Online Payment Agreement)
  • How to apply: Use the IRS Online Payment Agreement tool or file Form 9465 (Request for Installment Agreement). Consider a Direct Debit Installment Agreement (ACH) to reduce default risk.
  • What to expect: Interest and late-payment penalties continue to accrue until the balance is fully paid. Missing payments can terminate the agreement and reopen collection actions. See our guide on Fresh Start installment options for variations and traps: Understanding the Fresh Start Installment Agreement Options.

2) Temporary deferment: Currently Not Collectible (CNC)

  • What it is: If paying would cause significant financial hardship, the IRS can temporarily suspend collection activity and place your account in CNC status. This stops levies for the period the IRS recognizes inability to pay, though interest and penalties still grow.
  • How to request CNC: You’ll need to provide financial information (usually via Form 433‑F) showing income, living expenses, and assets. The IRS reviews and may re-evaluate your status periodically.
  • When CNC makes sense: You have little or no disposable income and your situation is short‑term (job loss, medical emergency) or you expect your financial picture to improve soon.

3) Offer in Compromise (OIC)

  • What it is: A formal IRS program allowing taxpayers to settle a tax debt for less than the full amount owed when the IRS believes the tax cannot be collected in full through installment payments or liquidation of assets. (IRS: Offer in Compromise)
  • Who qualifies: The IRS evaluates ability to pay, income, expenses, and equity in assets. You must be current with filing and estimated tax payments.
  • How to apply: File Form 656 (Offer in Compromise) and the required financial statement (Form 433‑A(OIC) or 433‑B(OIC)), and submit the application fee (the IRS typically charges a nonrefundable fee unless you meet low-income guidelines).
  • Important cautions: OICs are scrutinized and acceptance is not guaranteed. While an OIC is pending, stay current with filings and payments to avoid disqualification. See our deeper OIC guidance: Offers in Compromise: Eligibility and the Application Process.

Choosing the best short-term route — a practical checklist

  • Can you pay something each month? Start with an installment agreement to reduce immediate collection risk.
  • Is payment impossible now but likely in the near future? Consider CNC for temporary breathing room, but track how interest accumulates.
  • Is your debt larger than your ability to ever pay (even with assets sold)? Evaluate an OIC—prepare realistic documentation and expect a rigorous review.

Common mistakes and how to avoid them

  • Ignoring notices. That only increases penalties, interest, and the risk of liens or levies.
  • Using high‑cost debt to pay taxes (like payday loans) without a clear repayment plan — this can worsen cash flow.
  • Failing to file returns or stay current with taxes while negotiating — that disqualifies you from most IRS programs.

Practical tips from my experience

  • Act early: The sooner you contact the IRS, the more options you’ll likely have.
  • Prefer direct debit for installment agreements—automatic payments lower default risk and sometimes reduce user fees.
  • Keep organized documentation: pay stubs, bank statements, and expense records speed up applications for CNC or OIC.
  • Use credentialed help: Enrolled Agents, CPAs, and tax attorneys can negotiate with the IRS and help avoid scams.

What happens if you do nothing

  • The IRS will add interest and penalties, send increasingly aggressive notices, and may file a federal tax lien or levy wages, bank accounts, and other assets. (IRS: Understanding Your Tax Bill)

When to consult a professional

  • Your account already has a lien or levy.
  • You have complex business income, imminent foreclosure, or multiple years of unpaid tax.
  • You’re considering an Offer in Compromise — a pro can prepare the financials and spot pitfalls.

Authoritative sources and where to learn more

Professional disclaimer

This article is educational and does not constitute personalized tax advice. For decisions that affect your taxes, consult a qualified tax professional or the IRS directly.