Tax Problems: Find Your Situation

If you owe back taxes, the IRS adds interest (7% a year, compounded daily) and penalties until it's paid, and can eventually file liens and levy wages or bank accounts. Most people resolve back taxes with a payment plan; some qualify for an Offer in Compromise, Currently Not Collectible status or penalty abatement.

If you have unfiled tax returns, file them as soon as possible — even if you can't pay. The IRS generally expects the last six years to be filed before it will approve a payment plan or settlement. Filing stops the 5%-per-month failure-to-file penalty and replaces any IRS-prepared substitute return with your real numbers.

The IRS can garnish (levy) your wages after sending a Final Notice of Intent to Levy and waiting 30 days. The levy continues every paycheck until the debt is paid or released, leaving only an exempt amount. Setting up a payment plan, getting Currently Not Collectible status, or proving hardship usually gets it released.

An IRS bank levy freezes the money in your account on the day the bank receives it. The bank must hold the funds for 21 days before sending them to the IRS, giving you a short window to set up a payment plan, prove hardship, or fix an error and ask the IRS to release the levy.

A federal tax lien is the government's legal claim against your property when you don't pay a tax debt. The IRS generally files a public Notice of Federal Tax Lien when you owe more than $10,000. It's released 30 days after the debt is paid, and in some cases can be withdrawn early — for example after entering a direct-debit payment plan.

State tax agencies collect back taxes much like the IRS — with notices, liens, wage garnishments and bank levies — but each state sets its own rules, payment plan terms and settlement programs. Many states offer installment plans online, and some have an offer-in-compromise program. Contact your state revenue department directly; it doesn't coordinate with the IRS.

If you can't pay the IRS in full, file your return on time anyway and pay what you can. Then choose a route: a short-term plan of up to 180 days, a monthly installment agreement, Currently Not Collectible status if you can't afford any payment, or an Offer in Compromise if you can never pay in full.

Self-employed people owe tax debt more often because nothing is withheld from 1099 income. You owe income tax plus 15.3% self-employment tax on net earnings, normally paid through quarterly estimated payments. To catch up, file any missing returns, start current-year estimates, then set up a payment plan or other IRS option for the old balance.

When you file a joint return, each spouse is generally liable for the entire tax, even after divorce. A divorce decree assigning the debt to your ex doesn't bind the IRS, which can still collect from either of you. Innocent spouse, separation of liability or equitable relief may limit your share in specific situations.

Losing your job doesn't erase tax debt, but it can qualify you for hardship relief. If you can't cover basic living expenses, the IRS can mark your account Currently Not Collectible and pause collection. Unemployment benefits are taxable, so ask for withholding on them, and keep filing returns on time while you look for work.

Some older federal income tax debt can be discharged in bankruptcy, but only if strict timing rules are met: generally the return was due over three years ago, was filed over two years ago, and the tax was assessed over 240 days before filing. Fraud, payroll trust fund taxes and recent taxes generally aren't dischargeable.

The IRS can apply your refund to unpaid federal taxes from any year. Separately, the Treasury Offset Program can take it for past-due child support, federal agency debts such as defaulted student loans, state tax and some unemployment debts. You'll get a notice explaining the offset; disputes go to the agency that claimed the debt.

Yes. Through the Federal Payment Levy Program, the IRS can continuously levy up to 15% of Social Security retirement and disability benefits for unpaid federal taxes after required notices. Supplemental Security Income (SSI) is not levied. A payment plan, hardship status or other resolution can release or prevent the levy.

If you owe a "seriously delinquent" federal tax debt — more than $66,000 in 2026, including penalties and interest — the IRS can certify it to the State Department, which may deny a passport application or revoke a passport. The IRS sends notice CP508C. A payment plan, offer or full payment can lead to reversal.

The IRS can seize a home for unpaid taxes, but it's rare and heavily restricted. Seizing your principal residence requires approval from a federal district court judge, and it generally can't be done for a balance of $5,000 or less. A federal tax lien on your home is far more common than seizure, and most homeowners resolve debts long before it comes to that.

Yes. The IRS can levy IRAs, 401(k)s and pensions for unpaid federal taxes, but IRS procedures treat retirement savings as a later resort and require extra review, including whether the money is needed for living expenses. If funds are taken by IRS levy, the 10% additional tax on early distributions doesn't apply, though regular income tax still does.

The IRS treats cryptocurrency and other digital assets as property, so selling, trading or spending them can create taxable gains, and income from staking, mining or payments is taxable. Crypto tax debt often comes from unreported trades or gains that fell in value before the bill arrived. Amend or file the missing years, then use normal IRS payment options.

A revenue officer is an IRS collection employee who works cases in person, usually for larger balances, repeated non-compliance or unfiled returns. They can set deadlines, request financial statements and recommend levies or seizures. Real revenue officers carry two forms of IRS credentials and never demand payment by gift card, wire or cryptocurrency.

An IRS installment agreement can default if you miss a payment, don't file a return, or owe a new balance. The IRS usually sends a CP523 notice of intent to terminate first. Acting before the termination date is the best way to keep the plan; even after termination, you can often reinstate or set up a new agreement.

When someone dies owing the IRS, the debt generally becomes a claim against their estate, paid before heirs receive assets. Heirs aren't usually personally liable for a parent's tax debt. A surviving spouse is different: if you filed joint returns, you remain liable for joint balances, though innocent spouse relief may apply.

Service members have extra protections when they owe the IRS. Combat zone service extends filing and payment deadlines, the Servicemembers Civil Relief Act can cap interest at 6% on tax debt incurred before active duty, and collection may be deferred if military service materially affects your ability to pay. The standard IRS programs apply too.

If illness, disability or medical bills make it impossible to pay the IRS, you can ask for Currently Not Collectible status, which pauses collection. The IRS allows out-of-pocket health care costs when evaluating your finances, and serious illness can support penalty relief or, when long-term, an Offer in Compromise.

If you haven't filed in years, the IRS generally asks for the last six years of returns to be brought current. Start by getting wage and income transcripts, file the missing years, and then address any balance with a payment plan or other relief. Refunds expire after three years, and the IRS may have already filed substitute returns for you.