5 options to consider if you owe $10,000 (or more) in taxes

Opening your tax bill to find you owe the Internal Revenue Service (IRS) $10,000 or more can feel like a shock to the system. That sinking feeling is all too common, though. Millions of Americans find themselves facing significant tax debt each year, whether it's due to miscalculated quarterly payments, a major life change that affected their tax situation or simply an issue caused by falling behind over time.

These large tax bills can seem insurmountable at first glance, especially considering that the IRS has considerable power to collect unpaid taxes through measures like wage garnishment and property liens. But while owing a five-figure sum to the IRS is a serious issue, it's far from hopeless. There are several programs and payment options offered by the IRS that are designed to help taxpayers manage and resolve their substantial tax debt. 

But if you're going to use one of these options to tackle your tax debt, it's important to take action quickly, before any hefty penalties and interest cause the balance to grow even larger. Below, we'll detail the main options available to help with your significant tax debt.

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5 options to consider if you owe $10,000 (or more) in taxes

If you owe $10,000 or more to the IRS, it may be worth considering the following options: 

The IRS Fresh Start program 

The IRS Fresh Start program is a set of tax relief initiatives designed to help taxpayers who owe significant amounts of tax debt. Under this program, the IRS has made it easier to qualify for installment agreements and tax settlements, giving taxpayers more flexibility in how they resolve their debt. So, if you owe $10,000 or more and can meet the program requirements, this option could help you set up a reasonable payment plan without facing aggressive collection actions.

Start tackling your tax debt today.

An installment agreement 

If you can't pay your tax bill in full immediately, the IRS may allow you to set up an installment agreement, which spreads your payments out over time. This option helps you avoid more severe collection measures like liens and wage garnishments. There are different types of installment agreements available, including long-term plans for balances under $50,000. While interest and penalties will still accrue as you pay off what you owe, this option provides a structured way to manage your tax debt.

Offer in Compromise (OIC) 

An Offer in Compromise allows you to settle your tax debt for less than what you owe. During the qualification process, the IRS considers factors like your income, expenses and asset equity to determine if you qualify. This option is ideal for taxpayers experiencing financial hardship who have no realistic way to pay their full tax debt. Getting an OIC approved can be challenging, though, and many applicants are rejected, so it's typically beneficial to work with a tax professional during the process.

Currently Not Collectible (CNC) status 

If paying your tax debt would create severe financial hardship, you might qualify for Currently Not Collectible status. This means the IRS temporarily halts collection efforts against you. While your tax debt doesn't disappear, the IRS won't pursue aggressive actions like wage garnishments or bank levies while you remain in CNC status. However, interest and penalties continue to accrue, so it's best to explore long-term solutions if and when your financial situation improves.

Penalty abatement 

The IRS charges significant penalties for unpaid taxes, but in some cases, they may be willing to reduce or remove these penalties. If you have a valid reason for falling behind — such as a medical emergency, job loss or natural disaster — you can request a penalty abatement. This won't eliminate your tax debt, but it can make repayment more manageable.

Benefits of working with a tax relief company on your debt

While you can handle tax debt resolution directly with the IRS, many taxpayers find value in working with tax relief companies because they employ tax attorneys and enrolled agents who understand IRS procedures. These experts can also: 

• Evaluate your situation and identify the best resolution options
• Handle all communications with the IRS on your behalf
• Compile and submit any required documentation
• Negotiate with the IRS for the most favorable terms possible
• Help you avoid mistakes that could delay resolution
• Provide peace of mind during a stressful process

Just be sure to research any tax relief company you consider and understand that their services add costs to your overall resolution. In many cases, though, you may find this help to be worth it.

The bottom line

While owing $10,000 or more to the IRS is serious, it's a solvable problem with the right approach and commitment to resolution. The key, though, is to take action quickly. The sooner you take steps to address tax debt, the more options you'll have and the less you'll ultimately pay. So, whether you decide to work directly with the IRS or through a tax relief company, being proactive and maintaining communication throughout the process will typically lead to the best outcome.