What Happens If I Cannot Pay My Taxes?

Owing money to the IRS is often a major source of stress—especially if you don’t see a realistic way to pay off what you owe.

Fortunately, the IRS provides several relief options for both individuals and businesses who are struggling to meet their tax obligations. Let’s take a look at what these options include.

Short-term payment plan

If you owe less than $100,000 in total taxes, interest, and penalties, you may qualify for a short-term payment plan that allows you to pay the full amount within 180 days.

While this can give you some breathing room, keep in mind that interest and certain penalties will continue to accrue until the balance is paid off. There may also be setup fees. To apply, file IRS Form 9465.

Long-term payment plan

This takes the form of an installment agreement. Taxpayers who owe less than $50,000 may request a long-term monthly payment plan that stretches up to 72 months or six years.

This arrangement also includes interest and penalties that will continue to accumulate over time. Please note the setup fees may apply. If you’re interested in starting the process, file Form 9465 with the IRS.

Innocent spouse relief

If your tax debt stems from errors or fraudulent reporting by your spouse, you may be eligible for innocent spouse relief.

This option is available only when the liability is related to your spouse’s income—whether from employment or self-employment. To qualify, you must show that you were unaware of the issue and had no reason to suspect any misconduct. File Form 8857 to apply.

Partial payment installment agreement (PPIA)

A PPIA allows taxpayers to make monthly payments that won’t fully pay off their tax debt by the end of the IRS’s 10-year collection window.

This is a good option for people who can’t afford to pay their full balance but don’t qualify for an offer in compromise. To request a PPIA, submit Form 9465, Form 433, and all required supporting documents.

Offer in compromise (OIC)

An OIC gives taxpayers the chance to settle their tax debt for less than the full amount owed. The IRS considers several factors in deciding whether to accept an offer, including your income, expenses, ability to pay, and the value of your assets.

To qualify, you must do the following:

Be current on all required tax return filings and estimated payments
Not be involved in an open bankruptcy case
Have a valid extension if applying during the current tax year
Have made timely tax deposits for the current and prior two quarters if you run a business

Only 30–40% of OIC applications are approved, and the amount accepted depends on each taxpayer’s specific situation.

To apply, you must submit the following:

Only 30–40% of OIC applications are approved, and the amount accepted depends on each taxpayer’s specific situation.

To apply, you must submit the following:

Form 433-A (OIC) for individuals or Form 433-B (OIC) for businesses
Form 656, which helps calculate the minimum offer amount
All relevant supporting documentation, such as pay stubs, bank statements, mortgage and loan documents, credit card statements, brokerage account records, and a detailed monthly budget
A $205 non-refundable application fee unless the offer is rejected
An initial non-refundable payment based on your proposed settlement offer

Payment options include the following:

The IRS typically halts collection efforts once an OIC is submitted but may maintain existing federal tax liens until the offer is accepted and all conditions are met.

If the IRS doesn’t respond to your OIC within two years of receiving it, excluding any appeal time, the offer is automatically accepted. If your offer is denied, you have 30 days to appeal using Form 13711. The appeal process can take between 6 and 12 months.

Tax debt expiration (forgiveness after collection period)

In general, the IRS has 10 years from the date your tax debt is assessed to collect what’s owed. If the full amount isn’t collected within this time, the remaining balance may be forgiven. However, this type of tax relief is rare and involves a complex set of rules and procedures.

Seek professional help before choosing a path

Each IRS relief option comes with its own set of benefits, limitations, and complexities. Before moving forward, it’s highly advisable to consult a qualified tax professional who can help you understand your choices and guide you toward the best solution based on your financial situation.

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March 5, 2026