What Happens If You Owe The IRS and Can’t Pay?

Basically, with a few exceptions, if you owe money in the United States and make a good faith effort to reconcile with your debtor in a reasonable amount of time; whether that reconciliation takes the form of a payment-plan agreement, a lump-sum payment, or a declaration of indigence, you can remain relatively safe from prosecution that results in jail time or worse. It’s when you ignore provisions made for people in your situation, or try to outrun your situation entirely that things get bad, fast.

Delay Collection

For example, the IRS states on their web-page, “If you can’t pay any of the amount due because payment would prevent you from meeting basic living expenses, you can request that we delay collection until you’re able to pay”. Now, you have to be able to prove with documentation that you would be prevented from meeting basic needs if you tried to pay them, but, this provision alone may be of help if you take time to utilize it.

Alternatively, if you have reason to suspect that their assessment of your status (concerning liens and seizures enacted during your appeal process) was inaccurate, they state that “Under the Collections Appeals Program, if you disagree with an IRS employee’s decision regarding any levy, seizure, or Notice of Federal Tax Lien filing and want to appeal it, you can ask to have a conference with the employee’s manager.”

That might sound trite, but it can buy you time and escalate the situation if you’re patient.
Granted, they may not extend or suspend the Ten Year Statute of Limitations on your specific debt, but there are provisions in the tax code which allow them to seek extensions and they are more likely to do so with larger debts.

Contact Us

Taking no action at all is a gamble with, potentially, a lot more than you originally owed; so it’s better to try and work with the tools the system provides you while you can, and avoid more financial turmoil. Contact us for help with your tax situation today!