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Agreements to pay back taxes: What if you can't make the payments?

You couldn't pay all of your taxes on time, so you took out an installment agreement (IA) or got the IRS to accept an offer in compromise (OIC).

That was the sensible thing to do, to avoid the IRS taking collection action against you.

But what do you do if your circumstances change and you aren't able to make the payments you agreed to?

Of course it's a drag to have this happen. But keep in mind that you still have options.

One possibility is to ask the IRS to reduce the amount of the monthly payments you agreed to make. You'll probably have to provide documentation showing that your financial situation has gotten worse. If it has worsened significantly, however, there is a good case to be made for a reduction in the amount of your payments.

If you are experiencing serious financial hardship, another scenario could be to ask that your account be put into "currently not collectible" (CNC) status.

CNC status involves a recognition by the IRS that it simply isn't possible for you at this time to both make tax payments and have enough money to meet reasonable living expenses.

If your account is in CNC status, the IRS will generally hold off on taking any collection actions against you. To be sure, you'll still get charged interest and penalties on what you owe. And the IRS will grab any refunds that you have coming and put them towards your debt.

Unless your financial condition improves, however, CNC status can be a way to keep IRS collections off your back.

 

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