How to Get Out of Tax Debt Fast (Without Losing Your Sanity or Your Shirt)
So, you owe the IRS money. Maybe a little, maybe a lot. Either way, your stomach drops every time you see that notice in the mail, and you’re half-convinced your bank account is about to be seized any minute now. I get it. Been there, stressed about that.
Here’s the thing: tax debt isn’t a moral failing. It’s just math—very unfortunate math, wrapped in a big, sticky ball of panic and self-judgment. But drowning in tax debt doesn’t have to be your personality now. There’s a way out, and it doesn’t involve selling a kidney on the black market.
Step 1: Stop Panicking and Face the Numbers
I know, I know—looking at the balance feels like staring directly into the sun. But the first step to fixing a problem is knowing exactly what you’re dealing with. Log in to your IRS account (yes, it exists) or call them to get the real number, not the version you’ve been imagining in your head at 3 AM.
Also, let’s get this out of the way: the IRS is not coming to drag you to debtor’s prison. As long as you acknowledge the debt and start taking action, you have options. Ignoring it? That’s what gets people into real trouble.
Step 2: Understand Your Payment Options
The IRS isn’t as inflexible as horror stories make it seem. They offer payment plans, settlements, and even temporary hardship deferrals. Here’s the quick breakdown:
- Short-term payment plan (under 180 days): If you can pay it off quickly, you just make monthly payments until it’s gone.
- Long-term installment agreement: If you need more than 180 days, you can set up an installment plan with monthly payments.
- Offer in Compromise (OIC): If you’re truly broke, you might qualify to settle your debt for less. But proceed with caution—OICs aren’t easy to get.
- Currently Not Collectible (CNC) status: If you can prove you literally cannot afford to pay, the IRS may pause collections for a while.
The IRS actually wants to get paid, which means they’re surprisingly cooperative when you come to them with a plan. The trick is being proactive instead of waiting for them to start garnishing your wages.
Step 3: Build a Spending Plan That Works for You
Notice I didn’t say “budget.” Budgets, in the traditional sense, often feel like miserable crash diets—they’re all about restriction and suffering, and we both know that’s not sustainable.
Instead, try this: track your spending for a month. Every single dollar. Not so you can judge yourself, but so you can see where your money naturally goes. Once you have that data, build a spending plan around your real habits, rather than an arbitrary fantasy budget that turns your life into a joyless void.
Step 4: Save Money While Paying Off Debt (Yes, Really)
Here’s the mistake most people make: they think they have to clear every penny of debt before they can start saving. That sounds responsible, but in reality, it just keeps you stuck in the paycheck-to-paycheck trap. If you don’t have any savings and an unexpected bill pops up, where does the money come from? That’s right—more debt.
Even while you’re paying off tax debt, you should be building a little cushion. Start small. Toss extra change into savings, automate a tiny weekly transfer, or use a brain-dead simple app like Acorns that rounds up your spare change and stashes it away. It’ll barely dent your spending, but over time, little bits snowball into something real.
Step 5: Set Up Next Year for Success
The best way to avoid tax debt is to stop it before it starts. If your tax bill took you by surprise this year, adjust your withholding or start setting aside money for next year’s taxes now. Freelancers, side-hustlers, and anyone with uneven income: this step is non-negotiable. No one needs a repeat performance of Tax Debt: The Sequel.
FAQs About Getting Out of Tax Debt
What happens if I just ignore my tax debt?
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In the short term? Stress-induced stomach ulcers. In the long term? The IRS has scary powers, like wage garnishment and bank levies. Don’t ignore it—take action, even if all you can do today is call them and set up a plan.
Can I negotiate with the IRS on my own, or do I need a professional?
You can absolutely handle payment plans and most payment arrangements yourself. But if you owe a huge amount or need serious negotiation (like an Offer in Compromise), a tax pro may be worth it.
Should I pay off tax debt before credit card debt?
Probably, yes. IRS debt isn’t just debt—it comes with government-backed enforcement power. That said, if your tax debt is on a low-interest payment plan and your credit cards are hitting you with 29% interest, paying off high-interest debt first makes sense.
You Got This
Tax debt feels like a monster under the bed, but once you shine a light on it and take action, the fear fades. One step at a time, one payment at a time, you can get out of this.
And if you want more real-world, judgment-free advice on getting debt-free without losing your mind, subscribe to my newsletter and check out the Get Out of Debt Guy podcast. We’re in this together.
