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Options When a Serious Health Issue Affects Your Ability to Pay a Tax Debt

If you have a significant debt to the IRS while living with a chronic health condition or have been diagnosed with a serious illness, the combination can feel overwhelming. Can you negotiate with the IRS to reduce your debt amount or adjust the payment terms?

Yes. The IRS will consider how the potential implications of dealing with health issues may affect their ability to collect the debt:

  • Reduced income – You are unable to work for any period or become disabled.
  • Increased expenses – Your illness requires caregiving, special treatment, or medication.

And while the IRS does not designate any qualifying illnesses, in reviewing your case, the IRS will consider the category of hardship, such as terminal illness, advanced disease, prolonged hospitalization, or institutional care.

Adjusting Your Tax Debt Amount or Terms of Payment

Possible avenues for adjusting your tax debt include submitting an Offer in Compromise (OIC) or calling the IRS to request a delay in the collection process; you would be placed in Currently Not Collectible (CNC) status. In both cases, you can claim your actual medical expenses rather than being limited to the national standards for allowable monthly healthcare expenses, which usually apply; for 2025, it was $84 for individuals under age 65 and $149 for individuals age 65 and older.

Qualifying for any kind of adjustment in the amount of your tax debt or your payment schedule requires submitting the appropriate IRS forms and documentation such as a statement from your doctor regarding the diagnosis, your prognosis, and any physical or mental limitations the condition may cause, copies of medical bills, and evidence of how the condition is affecting your ability to work or function.

Highland Tax Group Can Help

When dealing with the stress of both a serious health issue and a significant tax debt, working with an expert from the Highland Tax Group can bring peace of mind. They help you present the best case possible to the IRS for adjusting the terms or amount of your debt. Contact Highland Tax today.