In general the procedure goes something like this:File all those past year returns youu2019ve u2018forgottenu2022 to file. Nothing can be done for you until you have filed all your current and overdue returns.Contact the IRS and try to set up an installment payment agreement. If you owe less than $50,000 this usually works. Note that if you are late in paying even one payment then the IRS will usually cancel the agreement and go after you for the full balance.Make an Offer in Compromise. Note that there isnu2019t a lot of u2018dickeringu2022 between you and the IRS in the case of an OIC. On a bumper sticker, you file a a form 433, which is an extensive personal financial statement. The IRS looks at the form and decides if an OIC is acceptable or not, based on their rules.The IRS may accept an OIC based on one of the following reasons:First, the IRS can accept a compromise if there is doubt as to liability. A compromise meets this criteria only when there's a genuine dispute as to the existence or amount of the correct tax debt under the law.Second, the IRS can accept a compromise if there is doubt that the amount owed is fully collectible. Doubt as to collectibility exists in any case where the taxpayer's assets and income are less than the full amount of the tax liability.Third, the IRS can accept a compromise based on effective tax administration. An offer may be accepted based on effective tax administration when there is no doubt that the tax is legally owed and that the full amount owed can be collected, but requiring payment in full would either create an economic hardship or would be unfair and inequitable because of exceptional circumstances.OICs are fairly rare, most are disapproved. Like the payment plan, any deviation from the terms of an accepted OIC can and usually does cause the IRS to invalidate the OIC and demand full settlement.If the taxpayer is just flat unable to pay because there really isnu2019t any blood in the turnip, then the IRS may be convinced that the debt is noncollectable, and place the taxpayer into u2018Currently not collectableu2022 status.There are lots of rules and caveats regarding u2018CNCu2022 status, it is not a u2018get out of tax jail freeu2022 card. But it is appropriate in many cases. For example, and older person confined to a nursing home for a disease or disability may have little likelihood of earning much money ever again even if they were once a strong earner.A taxpayer can do every one of these steps on their own, I strongly recommend getting professional help.If you are low income taxpayer then VITA may be able help you with filing and tax issues for free.Otherwise I recommend consulting an Enrolled Agent or Certified Public Accountant who is a tax specialist for advice and assistant with income tax problems or questions.To the average taxpayer, dealing with the IRS is often a frustrating nightmare. To an EA or tax experienced CPA the typical taxpayer problem is u2018Tuesdayu2019.Note that in my opinion going straight to a tax lawyer is unnecessary for most taxpayers. There is a little a lawyer can do for you that an EA or CPA canu2019t, short of going to tax court. In fact many tax lawyers hire EAu2019s or CPAu2019s do to almost all of the actual tax work anyway.If, on the other hand, your tax professional or you yourself suspect you have committed an actual crime then you do need to engage an attorney as soon as possible! Attorneys have much stronger client privilege than other tax professionals. You donu2019t want to wind up sharing a cell with Al Capone!In closing, I canu2019t emphasis enough that u2018forgettingu2022 to file your annual tax returns is the very worst thing you can do to protect yourself financially!You donu2019t want to to wind up paying hundreds or thousands of dollars to a tax professional to save your house from an IRS lien, only to be saddled with a huge debt to the IRS from your OIC or payment plan.Thatu2019s what will happen if you donu2019t file your annual tax return.