The Full Menu
Pay in full. Set up an installment agreement (monthly payments up to 72 months). Submit an Offer in Compromise (settle for less). Get Currently Not Collectible status (IRS stops collecting during hardship). Get penalties abated (reduce the balance by 20-40%). File bankruptcy (discharge qualifying debts). Wait for the CSED (debts expire after 10 years from assessment).
How to Choose
It depends on your income, assets, expenses, the age of the debt, and the total amount owed. A taxpayer with $200,000 in debt, minimal income, and few assets is an OIC candidate. A taxpayer with $30,000 in debt and steady income is a payment plan candidate. A taxpayer with $50,000 in nine-year-old debt might just need to wait it out with CNC status.
The Wrong Move
Ignoring the problem. Every day you wait, penalties and interest compound, and the IRS gets closer to enforced collection. Proactive engagement always produces better outcomes than reactive crisis management.
Every IRS debt has a solution. The question is which solution saves you the most money and stress.