<p>If you owe back taxes, the worst thing you can do is ignore the IRS. Penalties and interest accumulate daily, and the IRS has significant collection powers β€” including wage garnishment, bank levies, and liens on property. But there are real solutions available.</p><h2>File All Unfiled Returns First</h2><p>Before discussing payment, file every missing return. The <strong>failure-to-file penalty</strong> is 5% per month on unpaid tax (max 25%) β€” much steeper than the failure-to-pay penalty of 0.5% per month. Filing stops the larger penalty clock.</p><h2>Resolution Options</h2><h3>1. Installment Agreement (Payment Plan)</h3><p>Available for most balances under $50,000. Apply online at IRS.gov. Interest and penalties continue but at reduced rates while in an active agreement.</p><h3>2. Offer in Compromise (OIC)</h3><p>Allows you to settle your tax debt for less than the full amount owed β€” if you can demonstrate that you cannot pay the full liability or that it would cause economic hardship. The IRS accepts roughly <strong>40% of OIC applications</strong>. Use the IRS Pre-Qualifier tool at IRS.gov/OIC before applying.</p><h3>3. Currently Not Collectible (CNC) Status</h3><p>If you have no ability to pay, the IRS can temporarily suspend collection activity. Interest and penalties continue to accrue, but no collection action is taken.</p><h3>4. Penalty Abatement</h3><p>First-time penalty abatement is available to taxpayers with a clean compliance history. Call the IRS or submit Form 843 to request it after paying the tax owed.</p><h2>The 10-Year Statute of Limitations</h2><p>The IRS generally has <strong>10 years from the date of assessment</strong> to collect a tax debt. After that, the debt expires β€” though certain actions (like filing for bankruptcy or signing certain agreements) can extend this period.</p><p><em>Source: IRS Collection Procedures; IRS.gov/payments; Form 9465 (Installment Agreement Request); Form 656 (OIC)</em></p>