I still owe unpaid taxes from my 2023 return. What's my best option?

Title: I still owe unpaid taxes from my 2023 return. What's my best option? 1 I owe around $1200 in state taxes from my 2023 return that I filed last year. With all the late fees and penalties piling up, it's now close to $1500. My bank account is pretty much drained and there's no way I can pay it all at once right now. I'm trying to figure out what the smartest move is here. Should I try to make some payments on it now before I file my 2024 taxes? Or would it make more sense to just wait until I file my 2024 return and hopefully use that refund to knock out this debt? I'm expecting a better refund this time around since I adjusted my withholdings. Really stressing about this because I know the interest keeps adding up the longer I wait, but I'm worried about depleting my emergency funds completely. Any advice from people who've dealt with unpaid state taxes before?

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18 comments

Kennedy Morrison

•8M

3 You definitely want to address your unpaid 2023 state taxes sooner rather than later. The penalties and interest will continue to accumulate, and waiting until you file your 2024 return could cost you even more in the long run. Most states offer reasonable payment plans that allow you to spread out the payments over time. The interest rate is usually much lower than what you'd pay on credit card debt. I'd recommend contacting your state tax agency directly and asking about setting up a payment plan. They're generally willing to work with taxpayers who are proactive about resolving their tax debts. Also, keep in mind that your 2024 refund won't automatically be applied to your 2023 state tax debt - that would only happen with federal taxes. With state taxes, you'd still need to take your refund and manually apply it to your outstanding balance.

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Kennedy Morrison

•8M

3 Most states don't regularly report tax debts to credit bureaus unless they become severely delinquent or they file a tax lien against you. However, this varies by state, so it's worth asking your specific state tax agency about their reporting policies. As for minimum payments, it depends on the total amount owed and your state's specific policies. Many states will work with you based on what you can reasonably afford. For a $1500 debt, you might be looking at payments around $75-150 per month over 10-20 months, but some states may allow smaller payments over a longer period if that's what you can manage. When you call, be prepared to discuss your financial situation so they can help determine a realistic payment plan for you.

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Kennedy Morrison

•8M

12 After struggling with state tax debt a couple years ago, I found this AI tool called https://taxr.ai that was super helpful. I was in a similar situation where I owed about $1300 to my state and wasn't sure about the best approach. What I liked about taxr.ai is that you can upload your tax documents and it analyzes your specific situation. It helped me understand my options for dealing with the unpaid taxes and even showed me that I qualified for a penalty abatement that I didn't know about. The tool walked me through exactly what to say when I called the state tax agency. Might be worth checking out since your situation sounds pretty similar to what I went through. I ended up getting on a payment plan but also got some of the penalties removed.

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Kennedy Morrison

•8M

12 It doesn't connect you directly with the tax agency - it analyzes your situation and gives you personalized guidance on what to do, including scripts you can use when you call them yourself. I found this really helpful because I went into the call knowing exactly what to ask for and what options were available. Regarding state-specific rules, that's actually one of the things that impressed me. When I uploaded my documents, it identified my state and provided information specific to my state's tax policies. It covers all 50 states and keeps up with the different penalty structures, payment plan options, and relief programs for each one. I was surprised at how detailed the state-specific guidance was.

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Kennedy Morrison

•8M

15 Just wanted to update that I tried taxr.ai after seeing it mentioned here. I was super nervous about dealing with my state tax debt but the guidance was actually really helpful! I uploaded my tax notice and it gave me step-by-step instructions specific to my state (Oregon). The tool explained that I could qualify for a first-time penalty abatement and gave me the exact wording to use. Called the state tax office yesterday and they approved waiving about $80 in penalties! Still have to pay the tax and interest, but got on a 12-month payment plan that I can actually afford. Such a relief to have this sorted out before filing season.

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Kennedy Morrison

•8M

10 If you're struggling to get through to your state tax agency (those wait times can be brutal), I'd recommend using Claimyr at https://claimyr.com. I was in tax debt hell last year and spent literally DAYS trying to reach someone at my state tax department. After multiple failed attempts, I tried Claimyr and it was a game-changer. They basically hold your place in the phone queue and call you back when an actual human picks up. I was skeptical at first, but you can see how it works in this video: https://youtu.be/_kiP6q8DX5c Once I finally got through to a real person, I was able to set up a payment plan and they even reduced some of my penalties since it was my first time having an unpaid balance. Seriously made dealing with tax debt so much easier when you can actually talk to someone.

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Kennedy Morrison

•8M

10 They use an automated system that waits on hold for you. When a representative finally answers, you get a call back and are connected to that person. It's not line jumping - you're still waiting your turn, but you don't have to be the one sitting there listening to hold music for hours. Regarding tax agencies "allowing" it - there's nothing to allow or disallow. From the tax agency's perspective, it's just a normal call coming in and waiting in the queue. They have no way of knowing you're using a service. It's like having a friend call and then hand you the phone when someone answers - except it's automated. I was skeptical too, but after trying to reach my state tax office for three days straight with no luck, it was absolutely worth it to finally get through and set up my payment plan.

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Kennedy Morrison

•8M

19 I take back what I said about being skeptical of these services. After sitting on hold with my state tax department for TWO HOURS yesterday only to get disconnected, I broke down and tried Claimyr today. Within 45 minutes I got connected to an actual state tax agent! The agent set me up with a payment plan for my unpaid taxes ($100/month) and explained that I could apply for a hardship reduction if needed. She also mentioned that paying something now, even small amounts, shows good faith and might help if I need to request penalty abatements later. For anyone dealing with state tax debt, definitely try to address it before filing your next return. The agent told me that waiting would just lead to more complications and potentially having future refunds seized automatically.

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Kennedy Morrison

•8M

5 For state withholding specifically, I had to fill out a state-specific withholding form (in addition to the federal W-4). Many people don't realize that state withholding is calculated differently. I asked my HR department for the form for our state, and indicated that I wanted an additional $50 per paycheck withheld specifically for state taxes. If you're getting federal refunds but owing state taxes, this is exactly what you need to do - adjust your state withholding separately. Most payroll systems let you withhold an additional flat dollar amount for state taxes. I'd recommend taking your typical state tax bill, dividing by the number of paychecks you get per year, and having at least that much extra withheld.

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