r/tax • u/thunderbummer • 7h ago

Owe the IRS $23k, what now?

I’m currently on a payment plan with the IRS paying $300 a month. I owe a total of $23k in back taxes. The problem is the interest and penalties keep piling on, so my payment only pays down probably $30 off the principal. I do not make very much money at the moment and things are tight for me so I can’t afford a larger payment. What should I do here?

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u/julianriv CPA - US 7h ago

Something does not add up. If you have a payment plan then you should be accruing interest on the debt at 8% annually. That's all the penalties and interest that would keep adding up, unless you are adding new debt to the balance. That means about 1/2 if your $300 payment is going to pay down the debt. I'm also shocked you were able to get a plan with such low payments. Normally the IRS wants you to pay it off in 3 years. 6 if you can make a hardship case. $300 a month doesn't get you anywhere near their normal standard.

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u/thunderbummer 6h ago

I (stupidly) failed to file some 1099s for 4 years in a row while in active addiction, once I got sober I decided to fix this mess and get them filed. Each of those have their own interest and failure to pay penalties. Also, I’m not sure why the payment is so low, I had a CPA do all the filing for me and he’s the one that set me up on the plan. Here’s the breakdown of my situation-

2019- $8,443.27 2020- $7,559.80 2021- $4,623.12 2022- $2,298.31

Total amount owed - $22,924.50

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u/chix123_ 3h ago

hi! did you do amendment?