The Oscar winner owes the IRS a whopping $50,000 in back taxes from 2009, her rep confirmed to E! News.
The actress claims the recession took its toll, saying she is "not broke," but just "owes money" like everybody else, according to People, which first had the story.
"I'm paying it back. I'm not shying away from it and I'm certainly not ashamed of it," the actress told the mag. "It doesn't mean I'm a bad person. It's reality. It's the reality that a lot of people in America are facing."
Matlin insists she and her policeman husband have a "healthy and happy" family and live modestly, but they do send their four children to private school.
"Living modestly in a suburban neighborhood while trying to support four children through private school is not extravagant or living large. My husband is a Los Angeles-area police officer and between the two of us we have always made ends meet in the past, and we will in this circumstance as well."
"At the end of the day, it's about the best interests of the children," she told the mag. "Transitioning out of a private school environment will certainly relieve some of the financial pressures, but hopefully this will not compromise the kids."