Tax Problems With the IRS: Know Your Options

Few things make people more anxious than an envelope from the Internal Revenue Service. Whether the issue is an unfiled return, a balance you cannot pay, or a question about something on a past return, the situation is usually more manageable than it first appears. The IRS has established processes for most common problems. This guide explains the general options so you can understand what is happening and decide where to get help.

This is general information. It is not tax or legal advice about your own return.

Understand what kind of problem you have

Tax problems come in several forms. You may have a return you have not filed, a balance due that you cannot pay in full, a notice proposing a change to your return, or an audit request. Each type follows a different path, and the next step depends on which one you are dealing with.

Start by finding out what the IRS is actually asking for. Most notices explain the issue and list a contact number. The IRS page on understanding your notice or letter explains how to read the common types and what they usually mean.

Read the deadline on the notice

Many IRS notices include a response date. That date matters, because missing it can limit the choices you have later. Do not assume you have more time than the letter says. If you cannot meet the date, contact the number on the notice before it passes and ask what options exist for more time.

Consider payment options if you owe money

If you owe more than you can pay right away, the IRS offers several ways to set up payments over time. The most common is a payment plan, also called an installment agreement. You can check eligibility and apply through the IRS payment plans page and the online payment agreement application. Interest and penalties may continue to apply while a plan is in place, so ask how the total cost changes over time.

Some taxpayers in a difficult financial position ask about an offer in compromise, which is a request to settle a tax debt for less than the full amount. This process has strict requirements and a detailed review of your income, expenses, and assets. The IRS offer in compromise page explains how it works. Not everyone qualifies. While the IRS evaluates an offer, it generally suspends other collection activities, but ask how interest and penalties are handled in the meantime.

Know when you can appeal

If you disagree with a decision the IRS has made, you may be able to request a review. The IRS Independent Office of Appeals handles disputes over examination and collection actions. Appeals is separate from the office that made the original decision, and it works to resolve disputes without going to court.

Appeal rights often depend on the type of decision and on the deadlines printed in the notice. Read the notice carefully and keep copies of everything you send.

Ask for help if you cannot resolve the problem alone

The Taxpayer Advocate Service is an independent organization within the IRS that can help when you have a tax problem you cannot resolve on your own. You can learn more on the Taxpayer Advocate Service website. Its help does not replace the deadlines that apply to your case.

When a tax professional may help

Several types of professionals work on tax problems. An enrolled agent is a tax practitioner licensed by the federal government to represent taxpayers before the IRS. A certified public accountant, or CPA, is licensed by a state board and often prepares returns and handles audits. A tax attorney is a lawyer who focuses on tax law and may handle disputes in court.

A tax attorney can be especially useful when the issue may end up in litigation, when criminal exposure is possible, or when the facts are complicated. Communications with a tax attorney may have different confidentiality protections than communications with a return preparer. Ask any professional about their credentials, how they will represent you, and what they charge before you share detailed financial information.

If you are looking for an attorney in this area, the tax law practice page on this site explains the kinds of cases attorneys handle. Check any lawyer's license with the state bar before you hire them.

What to gather before you call anyone

Organize the documents first. Collect every IRS notice, the tax return for each affected year, bank statements, and any correspondence you have sent. A short written timeline of events helps too. It can save time in a phone call and makes it easier for a professional to understand your situation.

Keep a log of each contact with the IRS. Write down the date, the name or badge number of the person you spoke with, and what they said. Do not sign anything you do not understand, and do not agree to a payment arrangement without reading the terms.

Common mistakes to avoid

Many people make the problem larger by ignoring letters. Others send information without a clear cover explanation, or they pay a balance without checking whether it is correct. Some people assume that a call from a company offering to "resolve" their tax debt is from the IRS. Verify who you are talking to by using the phone number printed on official IRS correspondence, not a number supplied by a stranger.

Frequently asked questions

Can I resolve a tax problem without a lawyer?

Many issues are handled directly with the IRS, especially payment plans and notice responses. A lawyer may be worth considering if the issue is complicated, involves a large amount, or could lead to court proceedings.

Will the IRS stop collecting if I ask for a payment plan?

While a payment plan request is pending, the IRS is generally not allowed to levy (seize property or wages), with certain exceptions. Ask the IRS how these rules apply to your case.

What if I cannot file a return because I do not have the records?

You can often request your tax transcripts from the IRS and use them to prepare a return. Start with the IRS payments and account information page to see the options.

Is a tax problem a criminal matter?

Most tax issues are civil. Serious cases can involve criminal investigation, which is a reason to speak with a tax attorney right away if you are concerned about that possibility.

Related: Browse guides on legal topics and tax lawyers by practice area.

This page is general information, not legal advice. Laws change and every case is different — talk to a licensed attorney or enrolled tax professional about your situation.