IRS Tax Relief when you can't pay

IRS tax relief starts with the letter in your hand. It shows the amount, the date, and a notice number such as CP14. File the return, pay what you can, then pick a plan, an offer, or a delay. Interest is already running on the rest.

Start with the letter you got

Three things on the notice matter for everything that follows: the amount the IRS says you owe, the date it wants payment by, and the notice number printed on it, such as CP14. Keep the letter where you can find it.

If the amount looks wrong, call the number in the IRS help section of the notice. The IRS page for the CP14 notice asks you to have paperwork like cancelled checks or an amended return ready when you call, and it suggests calling Wednesday through Friday, when wait times are shorter. If you can't pay by the date, the same page says to contact the IRS by that due date.

If yours is a CP14, what a CP14 notice means explains what the IRS says to do next.

File your return, even if you can't pay

If a return is still due, file it on time anyway. The two penalties are very different in size. The failure-to-file penalty is 5 percent of the unpaid tax for each month or part of a month the return is late, up to 25 percent. The failure-to-pay penalty is 0.5 percent a month, also capped at 25 percent. When both apply in the same month, the IRS reduces the filing penalty by the payment penalty, so the two together come to 5 percent for that month.

A return more than 60 days late also has a minimum penalty. For returns due after December 31, 2025, it's $525 or 100 percent of the unpaid tax, whichever is less.

Filing keeps your options open, too. The IRS lists filing all required returns as a condition for an offer in compromise, and its tax payment options page says you must be current on filing before it will consider a payment plan request.

Pay what you can now

The IRS tells people who can't pay in full to pay as much as they can. Paying part of the balance now means less interest builds on the rest. The IRS underpayment rate for October through December 2026 is 7 percent a year, compounded daily, according to its quarterly interest rates page. The rate is reset each quarter at the federal short-term rate plus 3 percentage points, and the IRS charges interest on penalties as well as on the tax.

Two things change the monthly late-payment penalty. If you filed on time as an individual and the IRS approves a payment plan, the penalty drops to 0.25 percent a month while the plan is in effect. If the tax is still unpaid 10 days after you get a notice of intent to levy, it rises to 1 percent a month.

The IRS also mentions paying in full with a loan or a credit card, since a lender's interest and fees may be lower than the IRS interest and penalties combined. If you consider that, compare the lender's actual rate and fees against the IRS charges first.

Compare the three IRS options

Once you've filed and paid what you can, the rest of the balance usually goes one of three ways. Which one fits depends on what you earn, what you spend each month, and what you own.

Option	When it fits	Cost to start
Payment plan	You can pay the full balance, just not all at once	$0 for a short-term plan of 180 days or less. A long-term plan starts at $29 online with direct debit ($0 for low-income applicants).
Offer in compromise	You can't pay in full, or paying would cause a financial hardship	$205 plus a first payment, unless you meet the low-income qualifications
Temporary delay of collection	A financial hardship means you can't pay anything right now	No fee is listed on the IRS page

Payment plan

A short-term plan gives you up to 180 days to pay in full, with no setup fee. A long-term plan, which the IRS calls an installment agreement, has monthly payments and a setup fee: $29 if you apply online and pay by direct debit, or $69 online with another payment method. Applying by phone, mail, or in person costs more, and low-income applicants pay less or nothing. Interest and the late-payment penalty (reduced to 0.25 percent a month if you filed on time) keep running until the balance is paid, so a shorter plan costs less overall. The payment plan guide has the full IRS fee table and the limits for applying online.

Offer in compromise

An offer asks the IRS to settle for less than you owe. The IRS offer page says it may accept one if you can't pay in full or if paying would cause financial hardship, and that it looks at your income, expenses, and the equity in what you own. It generally won't accept an offer if you could pay in full through a payment plan, your assets, or both.

To apply, you must have filed all required returns, made any required estimated payments, and not be in an open bankruptcy. The application fee is $205 plus a first payment, unless you meet the low-income qualifications. With the lump-sum option you pay 20 percent of your offer when you apply. With periodic payments you keep paying while the IRS considers the offer. The IRS offer page links to a Pre-Qualifier tool that checks whether you qualify.

If the IRS rejects the offer, it keeps the application fee and applies your payments to the balance, and you can appeal to the IRS Independent Office of Appeals. How long an offer in compromise takes covers the timing and the two-year rule.

Temporary delay of collection

If a financial hardship means you can't pay at all, the IRS may put your account in what it calls Currently Not Collectible status. Most collection stops. You still owe the full amount, and penalties and interest keep adding up. The IRS may ask for a collection information statement, such as Form 433-F, along with records of your income, monthly living expenses, bank accounts, and property.

While your account is in that status, the IRS may review your finances later, resume collection if your situation improves, file a lien notice, and apply any federal refund to the debt. There's no fixed end date. You ask for it by calling 800-829-1040 or the number on your notice.

Ask whether penalty relief applies

If you've had a clean record, some penalties can come off. For years the main route was First Time Abate, which looks for three years of timely compliance and which you had to request by phone or with Form 843. The IRS says First Time Abate is moving to a new program, Automatic Exemption from Penalty, starting in summer 2026.

Under the new program, if you file or pay late but filed and paid on time for the three prior years, the IRS doesn't assess the failure-to-file or failure-to-pay penalty, and it sends a letter saying so. It starts with 2025 tax-year returns. You still owe the tax, the interest, and any other penalty. Our update on automatic penalty relief has the details.

If you don't qualify, you can ask for relief based on reasonable cause, and the IRS will tell you its decision. When a penalty is reduced or removed, the IRS also reduces or removes the interest charged on that penalty.

What happens if you don't respond

The IRS's own advice is not to ignore billing notices. If the balance stays unpaid, it has two main tools.

A federal tax lien is the government's legal claim against your property, including real estate and financial assets. It exists once the IRS has assessed the tax, sent you a bill, and you haven't paid in time. The IRS can also file a public Notice of Federal Tax Lien to alert other creditors. Paying in full releases the lien within 30 days.

A levy goes further and takes property. It can garnish wages, take money from a bank account, and seize and sell a car or real estate. Money in a levied bank account is held for 21 days and then sent to the IRS.

Before most levies, the IRS has to send a Final Notice of Intent to Levy and Notice of Your Right to a Hearing at least 30 days ahead. If that letter arrives, the IRS says to contact it right away. The home you live in has extra protection under federal law, which Can the IRS take my house? explains.

What the IRS holds off on while a request is open

Asking for an option also limits what the IRS does while it decides. The IRS says it is generally prohibited from levying while a payment plan request is pending. Once it processes an offer in compromise, it suspends most collection, and you don't have to keep paying an existing payment plan for the same balance while the offer is under review. You do have to keep making the offer payments you chose.

Two things can still happen during an offer. The IRS extends the time it has to collect, and it may file a lien notice.

Where to get help

You can ask for each of these options yourself, online or by phone. If you'd like someone to handle it with you, it helps to know who can speak for you. The IRS says enrolled agents, CPAs, and attorneys can represent you on any matter, including collection and appeals. A preparer with only a PTIN, or one in the Annual Filing Season Program, can't represent you on a collection issue. You give a representative authority with Form 2848.

If your income is low, a Low Income Taxpayer Clinic may help at no charge or for a small fee. Clinics can represent you on collection matters and appeals, the amount in dispute is usually under $50,000, and they're independent of the IRS even though the IRS funds part of their work. IRS Publication 4134 lists them.

Before you hire a private firm, read how to choose a tax relief company. It has the questions to ask and the red flags the IRS has warned about.

If you live in Spokane

Washington doesn't have an individual income tax today, so an income-tax bill for a Spokane household is a federal one, and everything above applies. The Spokane page shows how to book in-person IRS help, and it covers the state's tax on very high incomes that starts in 2028.

Questions people ask next

• Can the IRS take my house? The limits federal law puts on seizing a home, and the warnings you get first.
• How long does an offer in compromise take? What the IRS says about timing, and what happens to your account while you wait.
• What is a CP14 notice? What the letter says and what to do by its date.