Falling behind on your taxes can feel overwhelming—especially when you’re dealing with both the IRS and the North Carolina Department of Revenue (NCDOR). But if you live in North Carolina and can’t pay your tax bill, you’re not out of options.
This guide walks you through what to do if you owe taxes to the federal or state government and can’t pay in full right now.
Step 1: Don’t Ignore It
Whether your bill is from the IRS or NCDOR, ignoring it will only make things worse. Penalties and interest compound quickly. Plus, both agencies can garnish wages, levy bank accounts, and file tax liens against your property.
Responding early puts you in a much stronger position.
Step 2: Know Who You Owe – IRS vs. NCDOR
Each agency has different rules and programs. It’s critical to know whether the balance is owed to:
-
The IRS (federal tax)—they offer structured relief programs, installment agreements, and hardship options.
-
NCDOR (North Carolina state tax)—they’re typically stricter and faster with collections, but some relief is still available.
You may owe one or both.
Step 3: Apply for a Payment Plan (Installment Agreement)
If you can’t pay in full, both agencies allow you to request a monthly payment plan:
IRS Payment Plan
-
Available for debts under $50,000 (streamlined)
-
Can be set up online
-
May include automatic lien withdrawal after a period of on-time payments
NCDOR Payment Plan
-
Must contact NCDOR directly
-
Typically requires a down payment
-
Often shorter terms than IRS plans
-
Strict enforcement for missed payments
Step 4: Consider an Offer in Compromise (IRS Only)
If you genuinely can’t afford to pay what you owe and meet certain hardship criteria, the IRS may accept an Offer in Compromise (OIC)—allowing you to settle for less than the full balance.
Note: NCDOR does not offer an equivalent settlement program. For state taxes, you may instead need to demonstrate hardship or negotiate payment arrangements.
Step 5: Ask for Penalty Abatement
Penalties often make up a large portion of the balance. You can request first-time penalty abatement or reasonable cause relief from both the IRS and NCDOR.
Examples of valid reasons include:
-
Serious illness
-
Natural disaster
-
Loss of records
-
Relying on bad advice from a tax preparer
Step 6: Qualify for Currently Not Collectible (IRS Only)
If your financial situation is dire, you may qualify to be placed in Currently Not Collectible (CNC) status by the IRS. This suspends collection activity temporarily.
While the NCDOR does not have a formal CNC program, you can sometimes delay collections by submitting a hardship affidavit.
Step 7: Avoid Tax Liens and Levies
If no resolution is reached, the IRS and NCDOR may:
-
File tax liens against your home or business
-
Levy your bank accounts
-
Garnish your wages
-
Intercept future refunds
You can stop these actions by acting early and entering into a formal arrangement—even if you can’t pay in full right away.
Step 8: Get Help from a Licensed Tax Professional
Tax resolution is complicated, especially when you’re juggling both federal and state debt. A licensed Enrolled Agent (EA) can:
-
Represent you before both the IRS and NCDOR
-
Negotiate better payment terms
-
File the correct forms and documentation
-
Stop collection calls and notices
Polaris Tax & Accounting – Helping NC Residents Solve Tax Problems
📞 Call us at 704-947-3178
🧾 We help individuals and business owners across North Carolina
🛡️ Licensed Enrolled Agents with IRS and NCDOR experience
📍 No office visit required – remote help statewide