“I can’t pay my taxes.” It happens more often than you might think. You sit down to file your tax return — or your accountant calls — and the number staring back at you is not what you expected. Maybe you had a good year and didn’t set enough aside. Maybe you had a side job and didn’t pay quarterly estimates. Maybe you had a life event — a divorce, a job change, a medical crisis, a loan or debt you couldn’t pay — that scrambled everything.
However it happened, the result is the same: you owe the IRS money, and you don’t have it
Here is what you need to know.
First: File Your Return Anyway
This is the single most important piece of advice in this entire article.
Even if you cannot pay what you owe, file your tax return on time.
Here is why: the IRS has two separate penalties — one for not filing and one for not paying. The failure-to-file penalty is significantly harsher than the failure-to-pay penalty. If you don’t file, you get hit with both. If you file but can’t pay, you only face the failure-to-pay penalty, which is much smaller.
Filing your return is also what starts the clock on the IRS’s collection statute. It keeps you in compliance. It opens the door to resolution options. And it signals to the IRS that you are not hiding.
If you can’t afford the full payment, file anyway. Pay whatever you can. Then call a tax attorney.
What the IRS Does Next
If you file your return and show a balance due — or if the IRS determines you owe taxes from a previous year — here is what typically happens:
Stage 1: Notices. The IRS will begin sending you a series of notices. The first few are relatively mild — essentially reminders that you owe a balance. These notices escalate in tone over time.
Stage 2: Notice of Intent to Levy. Eventually, you will receive a Final Notice of Intent to Levy. This is the IRS telling you that if you do not respond, they will begin taking your assets — your bank accounts, your wages, your property.
Stage 3: Collection Action. If you continue not to respond, the IRS moves to active collection — bank levies, wage garnishments, tax liens, and, in serious cases, seizure of property.
Here is the critical thing to understand: at every stage of this process, you have options. The further along the process gets, the fewer options remain and the more urgent the situation becomes. But there is never a point at which you are completely out of options — as long as you have an experienced attorney in your corner.
Your Options When You Can’t Pay
Option 1: Installment Agreement. The most common resolution for people who owe but can’t pay in full. You agree to pay a set monthly amount until the debt is paid. The IRS has streamlined installment agreements for debts under certain thresholds and negotiated agreements for larger debts based on your actual financial situation.
An installment agreement stops collection action. It stops levies. It stops garnishments. It is not always the best option — but it is often a fast and reliable one.
Option 2: Offer in Compromise If you genuinely cannot pay the full amount you owe — now or in the foreseeable future — you may qualify to settle your debt for less than the full amount through an Offer in Compromise.
This is a real program with real benefits. It is also frequently misrepresented by tax relief companies that file offers for clients who don’t qualify, collect large fees, and leave clients with denied offers and more debt than before.
Qualifying for an Offer in Compromise requires a careful analysis of your income, expenses, assets, and future earning potential. An experienced tax attorney will tell you honestly whether you qualify — and won’t pursue an offer if you don’t.
Option 3: Currently Not Collectible. If your income barely covers your basic living expenses and you have no assets the IRS can seize, the IRS may place your account in “currently not collectible” status. This pauses all collection activity — no levies, no garnishments — while you are in this status.
The debt does not go away and interest continues to accrue. But for people in genuine financial hardship, this can provide critical breathing room.
Option 4: Penalty Abatement The penalties the IRS charges — failure to file, failure to pay, accuracy-related — can add up to tens of thousands of dollars on top of the actual tax you owe. Penalty abatement is the process of requesting that the IRS reduce or eliminate those penalties.
Many taxpayers qualify for first-time penalty abatement if they have a clean compliance history. Others qualify based on reasonable cause — circumstances beyond their control that led to the tax problem. Reducing penalties can significantly reduce the total amount you owe.
Option 5: Innocent Spouse Relief If your tax debt resulted from a joint return and your spouse — or former spouse — was responsible for the underreporting or underpayment, you may qualify for relief from that portion of the debt. This is a complex area with specific requirements, but it can be a powerful remedy for the right situation.
The Worst Thing You Can Do Is Nothing
Every year, people receive IRS notices, feel overwhelmed, and put them in a drawer. They tell themselves they’ll deal with it later. They hope it will somehow go away.
It does not go away.
The IRS has ten years from the date your tax is assessed to collect it. During those ten years, interest and penalties continue to compound. Collection action continues to escalate. And the options available to you slowly narrow.
The person who calls an attorney when they first receive a notice has far more options — and far less stress — than the person who calls after their bank account has been levied and their employer has received a garnishment notice.
If you filed your taxes this year and cannot pay what you owe, right now is the best time to call.
What About Extensions?
If you cannot file your return by the April deadline, you can request an automatic extension to October 15. This gives you more time to file — but it does not give you more time to pay.
If you owe taxes and request an extension, the IRS still expects payment by the original April deadline. Interest and late payment penalties continue to accrue on any unpaid balance.
An extension is useful for getting your paperwork in order. It is not a delay in your tax obligation.
This Tax Season — Don’t Wait
Right now, in March and April, thousands of people across Tucson and Southern Arizona are sitting with tax returns showing a balance they cannot pay. Some of them will call an attorney right away and get ahead of it. Others will wait until the IRS starts sending notices, and a few will wait until their bank account is frozen or their employer gets a garnishment notice.
The earlier you act, the more options you have. The more options you have, the better the outcome.
If you filed and can’t pay — or if you suspect you’re going to owe more than you can handle — call us now. The consultation is free, and the conversation could save you years of IRS headaches.
Serving Tucson and All of Southern Arizona
Lazarow Law Firm, P.L.C. helps individuals and businesses throughout Tucson, Oro Valley, Marana, Green Valley, Sierra Vista, Bisbee, Benson, Douglas, Nogales, Florence, and all of Pima, Cochise, Santa Cruz, and Pinal counties resolve their IRS tax debt.
📞 (520) 623-5856
Free consultation. No obligation. Just honest answers about your options.
Sheldon Lazarow is a Tucson, Arizona tax attorney with 50 years of legal experience, including 25 years of IRS tax debt resolution. Licensed to practice before the IRS, all Arizona and California state and federal courts, the Ninth Circuit Court of Appeals, and the United States Tax Court. Lazarow Law Firm, P.L.C. | 25 E. University Blvd., Tucson, AZ 85705.