Getting an IRS notice is not something to be scared of. With the passage of the IRS Restructuring and Reform Bill of 1998, getting an IRS notice also comes with a number of options on how to deal with your tax problems:
This might seem like the best option especially if really have no way of getting enough money to pay your taxes. In this option, IRS would be reviewing your record on a regular basis to see if you already have the capacity to pay. A tax lawyer would typically recommend against this, as interests will continue to accrue overtime and you might end up paying far more than what you had to pay before.
Filing for bankruptcy affords you a break from all your financial woes, yet this is an option that is not for everyone. In some cases, you would be allowed to pay on a monthly basis with very little interest. Because of the complexity of bankruptcy law, it is typically recommended that you consult first with a tax lawyer before you avail of this option.
Although the interest is still compounded, installment payment tends to be better than a hardship suspension in that you are still able to pay a certain amount of what you owe the IRS. Depending on how much you owe in taxes, you might be given three years in order to settle everything. With the installment payment, you have the option of paying a higher amount if you want to pay up your taxes as soon as possible.
Making a compromise with the IRS can happen but it usually is allowed on a case-to-case basis. This means that IRS would allow you to pay a certain amount only of what you owe in exchange for something else.