What To Do If You Can’t Afford to Pay Your Taxes

Financial Horizons: Insights for Building Wealth and Securing Your Legacy

By Dr. Jose G. Cardenas, Chief Tax Strategist at The C & R Group, LLC

Let’s be honest—few things hit harder than finishing your tax return, seeing the final number, and realizing:

“I owe, and I don’t have the money.”

That sinking feeling is real. But here’s what most people don’t realize:
The worst thing you can do is freeze and do nothing.

The IRS has systems, options, and programs for people who can’t pay in full—but you only get access to them when you file, communicate, and take action.

This article will walk you through practical steps you can take if you can’t afford to pay your tax bill right now—without panicking or doing something that hurts you long-term.

Step 1: File Your Return (Or an Extension) Anyway

If you can’t pay, it’s tempting to think, “I’ll just wait to file until I have the money.”

Bad move.

There are two different penalties at play:

• Failure-to-file penalty – kicks in when you don’t file on time
• Failure-to-pay penalty – kicks in when you don’t pay on time

The failure-to-file penalty is usually worse and adds up faster. When you skip filing, you’re stacking penalties on top of penalties.

What to do instead

• File your return on time, even if you can’t pay the full balance.
• If you truly can’t get the return done, at least file an extension so you avoid the failure-to-file penalty.
• Remember: an extension gives you more time to file, not more time to pay—but it still protects you from one of the most painful penalties.

Filing—even with a balance due—is you saying, “I’m not hiding. I’m taking responsibility.” The IRS responds much better to that than silence.

Step 2: Ask for a Payment Plan

If you can’t pay in full, one of the simplest options is an installment agreement—a payment plan with the IRS.

With a payment plan, you:

• Make monthly payments toward your balance
• Reduce the risk of aggressive collection actions
• Show you’re making a good-faith effort to resolve your tax debt

There are different types of plans depending on how much you owe and your financial situation. Some can even be set up online if you qualify.

This is where a tax professional can help you:

• Decide which type of plan makes sense
• Negotiate realistic terms
• Avoid agreeing to a payment amount that wrecks your monthly cash flow

The key idea: don’t wait for the IRS to chase you. You step forward first.

Step 3: Look for Ways to Raise Cash (Without Panicking)

Once you know what you owe and you’ve set up (or requested) a plan, the next move is to strengthen your cash position.

Some options to consider:

• Sell something you don’t truly need
  Extra vehicle
  Collectibles you’re not attached to
  Unused equipment, tools, or electronics
• Trim expenses ruthlessly for a season
  Subscriptions you forgot about
  Eating out vs. cooking at home
  Non-essential travel and entertainment
• Temporarily increase your income
  Overtime if available
  A short-term second job
  Freelance or gig work using skills you already have

Is any of this fun? No.
Is it better than letting penalties, interest, and stress pile up for years? Absolutely.

Short-term sacrifice to clean up a tax problem is often cheaper than dragging it out over a decade.

Step 4: Explore Hardship and Relief Options If You’re Truly Struggling

Some taxpayers are in genuine financial hardship—job loss, health crisis, disability, or limited income.

In those cases, there may be options like:

• Temporary collection pauses in severe hardship cases
• Offer in Compromise (OIC) in specific situations where you can’t realistically ever pay the full amount
• Other forms of relief depending on your facts and circumstances

These programs are complex, and not everyone qualifies—but if your situation is serious, it’s worth having a professional review whether you might be eligible for something more than just a payment plan.

This is not about “gaming” the system—it’s about the IRS recognizing that in some cases, full collection is not realistic.

Step 5: Talk to a Professional Before You Tap Certain “Solutions”

When people are under tax pressure, they often reach for fast money:

• High-interest credit cards
• Retirement account withdrawals
• Loans that wreck their long-term picture

Sometimes a short-term loan is part of the solution—but you want that decision to be strategic, not desperate.

A tax professional can help you think through:

• Is it better to borrow and pay the IRS now, or use a payment plan?
• What are the tax consequences of pulling money from a retirement account?
• How do we solve the root cause so this doesn’t happen again next year?

You want a plan that fixes the problem without blowing up your future.

Step 6: Build a Better Tax Game Plan Going Forward

Once we’ve stabilized the situation—filed, set up a plan, and stopped the bleeding—the next mission is simple:

Never end up here again.

That means:

• Adjusting withholding or estimated tax payments so you’re not blindsided
• Setting aside a tax savings account throughout the year
• Tracking income and deductions properly
• Using strategies (retirement contributions, entity structure, etc.) that reduce your future tax bill legally

Tax stress usually comes from surprises. Tax confidence comes from systems.

Final Thoughts: You Don’t Have to Face This Alone

If you can’t afford to pay your taxes right now, it doesn’t mean you’re irresponsible or hopeless. It means life happened—and now it’s time for a plan.

The worst moves are:

• Not filing
• Not opening IRS mail
• Letting fear drive you into silence

The better moves are:

• File (or extend) on time
• Communicate with the IRS
• Get help building a solution that fits your real financial life

If you want a guide instead of guessing your way through it, that’s exactly what my team and I are here for.

🔗 Read more at: www.thecrgroupllc.com/blog

📅 Book your consultation: Book a consultation with Dr. Cardenas

About the Author

Dr. Jose G. Cardenas is a retired U.S. Army Finance Officer and the Chief Tax Strategist at The C & R Group, LLC. With a Doctorate in Business Administration and over 20 years of experience in financial strategy and tax planning, Dr. Cardenas helps individuals and business owners resolve tax problems, reduce future tax burdens, and build lasting wealth and legacy. Learn more at www.thecrgroupllc.com

📌 Disclosure

This article is for educational and informational purposes only and is not intended to serve as personalized legal, tax, or investment advice. IRS rules, relief programs, and payment options are complex and subject to change. You should consult with a qualified tax professional about your specific situation before making any decisions. Dr. Jose G. Cardenas, DBA, provides tax advisory services through The C & R Group, LLC. Insurance and investment strategies may be offered through his role as a licensed financial professional affiliated with Experior Financial Group.

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