If you can't pay the taxes you owe to the IRS, don't worry. The agency is aware that many individuals have money troubles and is willing to help out where it can. Here are some suggestions on how best to deal with tax-related debt:

Apply For An Installment Plans

Unless you meet certain requirements, qualifying for a tax installment plan may not be an option. The IRS prefers to receive tax payments rather than nothing at all, but it also isn't likely to enter into a payment agreement with someone who cannot make monthly installments.

If you owe the IRS more than $50,000, they will not work with you. If you meet the debt requirements and have filed all past tax returns, the IRS will calculate the monthly payments using a formula. You should get in touch with a certified tax resolution specialist or an attorney who specializes in tax debt to review your options and negotiate a payment plan with the IRS.

File An Offer In Compromise

The IRS has a process called an offer in compromise, which allows people owing back taxes to pay a reduced amount. To be eligible, you must prove that you're unable to pay the full amount and agree to either make a lump-sum payment or short-term installments of what you owe.

You might have seen commercials that claim you can pay the IRS only pennies on the dollar, but those advertisements are misleading. The IRS has a special form for proposing a compromise, and it charges a $186 filing fee. The form requires detailed information about your income and spending habits as well as assets and equity you might have in investments. If you're working for wages or self-employed, a collection information statement is used to evaluate your ability to pay back what you owe will also be necessary.

The IRS will take into account your net value and credit line sources such as credit cards and home equity lines of credit when making a judgment about your application. They will compare what you make monthly to what your expenses are in order to decide how much you are able to pay per month.

Applying for a compromise is impossible if you have an open bankruptcy filing. If your application for a compromise agreement is accepted, you will then have two years to pay off your tax debt.

Release Wage Garnishments

If you have not reached a payment agreement and owe money, the IRS could garnish your wages. It also can garnish federal payments (like Social Security or tax refunds) until your debt is paid or until the time limit for collecting has passed. If you cannot afford to live on what is left after a garnishment, contact the IRS to ask for a modification. The amount that would be taken might be reduced if the IRS agrees to your request.

Innocent Spouse Programs

If you're legally separated but file a joint return with your spouse, you can be individually held responsible for an underpayment. The good news is that the IRS offers some relief to married or separated couples in cases where one spouse tries to hide tax liability from the other.

If your spouse or partner falsely reported income, took improper deductions or credits, etc., you may not be responsible for the taxes.

If you want to qualify for innocent spouse relief, you'll need to prove that your partner duped you by not revealing income or taking deductions and credits they weren't allowed. You usually have a two-year window from when the IRS first tried to collect unpaid taxes to apply for this type of relief.

The Offer in Compromise program from the IRS may help some taxpayers reduce their overall tax debt, though most applications get denied. In order to apply, taxpayers must meet the qualification requirements set by the IRS, which include having filed all required tax returns, making all required estimated tax payments for the current year, and being current on all federal tax obligations.

Taxpayers must also submit financial information to show that they cannot pay the full amount of their tax debt. The IRS will then evaluate the offer and make a decision based on the taxpayer's ability to pay, the amount of taxes owed, and other factors. In 2021, the IRS only accepted 15,154 out of 49,285 offers. However, some people think that it is worth a try because it can help to reduce the amount of taxes owed.