The 26-year-old star turned down the huge pay day to compete on the ballroom dancing show because she wants to re-establish herself as an actress.
Although she has numerous financial problems, the 'Liz & Dick' actress didn't consider taking bosses up on their offer, gossip website TMZ reports.
A representative from 'Dancing with the Stars' said: "We don't comment on casting."
Lindsay's reputed financial problems include owing her former attorney Shawn Holley $300,000 in unpaid legal fees.
Her 'Scary Movie 5' co-star Charlie Sheen also lent her $100,000 to help her pay off her $233,904 tax bill last year.
Despite the troubled starlet's reluctance to take part in 'Dancing with the Stars' many famous faces have learnt to ballroom dance, including Pamela Anderson, Kelly Osbourne and 'Dirty Dancing' actress Jennifer Grey.