If you owe back taxes, the hardest part is often the not-knowing — the pile of unopened mail, the vague dread every time the phone rings. Here’s something reassuring: the IRS and the California Franchise Tax Board both have established, orderly ways to deal with people who are behind. You don’t need a perfect answer today. You need a sensible first step, and then a second one. This guide walks through what to do, in order.
Step 1: Find out exactly what you owe
You can’t solve a problem you can’t see. The first move is to get a clear picture of your situation: which years are unpaid, whether any returns are unfiled, and how much of the balance is tax versus penalties and interest. The IRS keeps transcripts that show this, and California maintains its own records. Getting an accurate total — for both federal and state — is the foundation for everything else.
Step 2: File any missing returns
It’s a common instinct to avoid filing when you can’t pay, but that usually makes things worse. Failing to file generally carries steeper consequences than failing to pay, and unfiled returns can keep the clock from ever starting on resolving your debt. Filing — even late — puts you back in the system and opens the door to relief programs. If the IRS filed a “substitute” return for you, replacing it with an accurate one often lowers the balance.
Step 3: Don’t ignore the notices
IRS and FTB letters escalate over time, from friendly reminders to notices of intent to levy or lien. Each one is also a decision point where you can respond and change the trajectory. Opening the mail — as unpleasant as it is — keeps you in control of the timeline instead of being caught off guard by a garnishment or levy.
Step 4: Choose a resolution that fits your finances
Once you know the numbers, you can match them to a solution. Options often include a monthly installment agreement, a hardship status if paying anything would leave you unable to cover basics, an offer in compromise to settle for less if you qualify, or penalty relief if you had reasonable cause for falling behind. The right choice depends entirely on your income, assets, and the size of the debt.
Step 5: Consider whether bankruptcy is part of the picture
This surprises people, but certain older income tax debts can sometimes be discharged in bankruptcy if strict timing and filing conditions are met. If your tax debt is tangled up with other obligations, it’s worth understanding how it fits into your broader financial picture — something our bankruptcy practice can evaluate alongside your tax situation.
Step 6: Get professional eyes on it
Tax resolution has a lot of moving parts, and the agencies won’t necessarily volunteer the option that’s best for you. An experienced Bay Area attorney can pull your records, deal with the IRS and FTB on your behalf, and help you avoid missteps that cost time and money.
Frequently asked questions
What happens if I just don’t pay? Penalties and interest keep growing, and the IRS and FTB can eventually pursue liens, wage garnishment, and bank levies. Ignoring it removes your options over time, which is why acting early matters.
Should I file even if I can’t pay? Generally yes. Filing and paying are separate obligations, and filing on time (or catching up) usually reduces penalties and keeps more solutions available to you.
Can old tax debt ever go away on its own? The IRS generally has a limited window to collect, but the rules are technical and many actions can extend it. Don’t count on waiting it out — have your situation reviewed.
Do I have to deal with the IRS by myself? No. You can have an attorney communicate with the IRS and FTB for you, which many people find takes an enormous weight off their shoulders.
Take the first step — free consultation
You don’t have to untangle this alone, and you don’t have to have it all figured out before you call. The Somal Law Firm in Pleasanton helps Tri-Valley and East Bay residents deal with back taxes calmly and strategically. Call (415) 754-0115 for a free consultation or reach us through our contact page. One phone call can replace a lot of worry with a plan.
Attorney Advertising. This article is general legal information for Bay Area residents, not legal advice, and does not create an attorney–client relationship. Every situation is different — please consult a licensed attorney about your specific circumstances.