Falling behind on your taxes can feel overwhelming, but ignoring the problem will only make it worse. The good news? You have options to get back on track, avoid penalties, and even reduce what you owe.
If you’ve missed tax payments or haven’t filed in a while, follow these steps to resolve the issue as quickly as possible.
1. Don’t Ignore the Problem
The IRS doesn’t forget about unpaid taxes. If you owe money, they will charge interest and penalties until the balance is paid. In extreme cases, they can garnish wages, seize bank accounts, or put a lien on your property. The sooner you address the issue, the easier it will be to resolve.
2. File Any Late Tax Returns
Even if you can’t pay right away, filing your missing tax returns is the first step. The IRS charges a Failure to File penalty (5% of what you owe per month, up to 25%), which is separate from the penalty for not paying. If you file but don’t pay, the penalty is much lower (0.5% per month).
If you’re missing financial records, you can:
- Request copies of your W-2s or 1099s from past employers.
- Use the IRS Get Transcript tool to find past tax records.
- Work with a tax professional to reconstruct your income and deductions.
3. Check If You Qualify for a Payment Plan
If you owe less than $50,000, the IRS offers an Installment Agreement that allows you to make monthly payments. You can apply online or by phone.
- Short-term plan (if you can pay in 180 days or less)
- Long-term plan (monthly payments over several years)
As long as you stick to the agreement, the IRS won’t take collection actions against you.
4. See If You Can Settle for Less (Offer in Compromise)
If you’re in serious financial hardship, you may qualify for an Offer in Compromise (OIC), which allows you to settle your tax debt for less than what you owe. However, the IRS only approves OICs if you prove you can’t afford to pay the full amount.
5. Request Penalty Relief
If you’ve always paid on time before and have a good history with the IRS, you might qualify for a First-Time Penalty Abatement. This can remove penalties from your tax debt, reducing how much you owe.
6. Avoid Future Tax Problems
Once you’re back on track, take steps to prevent falling behind again:
✅ Adjust your withholdings – Make sure enough taxes are being taken out of your paycheck.
✅ Make estimated tax payments – If you’re self-employed, pay quarterly taxes.
✅ Stay organized – Keep records of your income, deductions, and tax deadlines.
Final Thoughts
Being behind on taxes isn’t the end of the world—but ignoring it can lead to bigger financial problems. Whether you need to file late returns, set up a payment plan, or negotiate a settlement, taking action now can help you regain control and avoid further penalties.
If you’re unsure where to start, consider speaking with a tax professional who can help guide you through the process. The sooner you act, the easier it will be to resolve!