Declare bankruptcy
Let’s hope it doesn’t come to this. “People who might declare bankruptcy are the people who couldn’t pay their taxes because they couldn’t afford to pay their mortgage or expenses and get caught in a bit of a bind,” explains Green. “Usually it’s people who are caught for three or four years not filing, spending the money they didn’t pay the IRS on things to try and stay above water.”
Remember that bankruptcy isn’t magic: While in certain cases, a tax debt can be discharged, if it has turned into a tax lien, it might not be erased. “Instead,” clarifies Green, “the IRS will generally suspend the debt and seek to collect it after bankruptcy.”
