I owe the IRS more than I can pay — what are my options?
By Fidelis Solutions · Published May 21, 2026
I owe the IRS more than I can pay — what are my options?
Three statutory pathways exist for taxpayers who cannot pay in full: an installment agreement under IRC §6159, an Offer in Compromise submitted on Form 656, and Currently Not Collectible status under IRS Publication 594. Each pathway produces a different financial outcome. A taxpayer who owes $87,000 and earns $4,500 a month could face $120,000 in total payments under an installment agreement — or settle the same liability for $18,000 under an Offer in Compromise.
How this works
An installment agreement under IRC §6159, requested through IRS Form 9465, allows monthly payments as low as $25 for qualifying individuals. Setup fees range from $31 to $225 depending on payment method, per IRS Publication 556 (2025 edition). Interest and penalties continue to accrue throughout the repayment period, which means a large balance compounds significantly over time.
An Offer in Compromise filed on Form 656 allows a taxpayer to settle a tax liability for less than the full amount owed. The IRS evaluates the taxpayer's Reasonable Collection Potential — a figure derived from income, assets, and allowable expenses — against the total liability [IRS Rev. Proc. 2024-31 §4.02]. When Reasonable Collection Potential falls below the liability amount, the IRS holds legal authority to accept a reduced settlement. The IRS Data Book 2024 recorded fewer than 15,000 Offer in Compromise applications processed in FY 2024 against $4.7 trillion collected — a gap that reflects widespread underutilization of a legitimate statutory remedy.
Currently Not Collectible status, designated under IRS Publication 594, pauses all IRS collection action for a minimum of 120 days and tolls the 10-year statute of limitations on assessment. Interest and penalties continue to accrue during Currently Not Collectible status. Currently Not Collectible designation does not eliminate the debt. It creates time to stabilize income, evaluate assets, or build a stronger Form 656 submission.
Fidelis Solutions pairs a credentialed professional with AI-driven Reasonable Collection Potential modeling to calculate all three resolution pathways before a client selects one. The methodology mirrors what the IRS itself applies under IRS Rev. Proc. 2024-31 §4.02. A client does not navigate IRS resolution methodology alone — a professional walks alongside them and the technology amplifies the precision of that work, enabling expert-level outcomes in territory most taxpayers have never had to navigate before. Begin a structured assessment at https://www.fidelis.solutions/intake.
Sources
- IRC §6159 — Installment Agreement authority
- IRS Form 9465 — Installment Agreement Request
- IRS Form 656 — Offer in Compromise application
- IRS Rev. Proc. 2024-31 §4.02 — Reasonable Collection Potential methodology
- IRS Publication 594 — The IRS Collection Process (Currently Not Collectible designation)
- IRS Publication 556 (2025 edition) — Installment agreement setup fee schedule
- IRS Data Book 2024 — FY 2024 collections and Offer in Compromise processing volume
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