The IRS offers several options for handling tax debt you can’t pay in one lump sum. The most common alternatives to enforcement actions are the Installment Agreement and the Offer in Compromise. However, the IRS requires you to be in tax compliance before considering either option.
Tax compliance means having filed the last six years of tax returns and, if you’re earning income, paying enough in current taxes to avoid owing on your next return. If you’re a wage earner, the IRS will review your pay stubs to ensure proper withholdings. If you’re self-employed, they’ll check your transcript for timely quarterly payments.
If you have unfiled returns, you should file them before requesting an Installment Agreement or Offer in Compromise. These returns don’t need to show a zero balance; any new balances can be included with your existing debt.
Once you’re in tax compliance, the IRS will allow you to submit a payment plan or an Offer in Compromise to settle your debt for less than the full amount owed.
Filing returns with a balance you can’t pay requires some strategy, so work with a qualified tax professional to help navigate the process.
As a Matter of Tax 