Back Taxes? Take The Bull By The Horns

Posted on Sep 6 2013 - 12:03am by Irina Bobrova

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Dealing with the official government authorities sometimes can be like dealing with someone you can overlook paying your dues to. After all, they are not banks. They do not ask you to sign any contract. They do not threaten you with taking away your property if you don’t comply. They just demand a percentage of the money you make (called taxes) because they say so, because your contributions are supposed to help the entire nation, but mainly because they have the power to do so.

However, those who have not filed tax returns and/or didn’t pay taxes for whatever reason soon learn the government is nothing but a lazy lion you should not play with. It might smile at you for a while, or pretend it didn’t notice you didn’t pay taxes; but when time comes to get up and bite, it does hard. At first, you get some friendly reminder letters about your debt, but if you ignore them or choose not to open at all thinking that what you don’t see is not your problem, you’ll soon learn that your bank accounts are frozen, your savings levied and even your own pay check garnished (taking your reputation before your boss down right to where fossils are in the process).

Millions of people have experienced it, and they can all testify that it is much worse than a visit to a dentist. And it’s not comforting to know that getting away from these collection measures is quite difficult and time-consuming process. Picture this —sleepless nights, confrontations with family members, countless consultations with tax representatives, paying fees here and there for many weeks or months during the process that is exactly what you will end up doing if you reach that point in the process.

Sounds like a nightmare? It is, that’s why I recommend all my tax clients to take the bull by the horns and face the situation.

In the United States, the Internal Revenue Service offers some financially challenged taxpayers a settlement program (not all taxpayers are qualified for this program though). In short, the government allows you to pay just a fraction of your tax debt for a promise to stay in compliance in the future. Some people pay only 10-20% of what they originally owed the IRS! The Offer in Compromise program is a great way to get a Fresh Start. Use this tool and see for yourself if you can settle your tax debt for less. If you do, then go for it.

If you do not qualify, there are many other options you may take with the help of a tax representative. First, ask him/her to review your tax records. Sometimes finding a mistake leads to filing an amended tax return which also leads to a significant reduction in your tax debt.

If everything else fails, your tax practitioner can help you get into a payment plan and represent you before the IRS and state, if you dread of the thought of doing it yourself. Once you get into a payment agreement, collection measures usually stop and you can rest at ease knowing your tax situation is now under control.

Photo Credit: Flickr/401(K) 2012

About the Author

Irina N. Bobrova, EA, CAA, is the founder of IBA Tax Group and is proud that her vast financial training and tax experience has given her the knowledge and tools necessary to analyze and understand multi-faceted tax problems and find targeted tax collection resolutions that work. As Chief Operating Officer and Program Analyst for PitBullTax Software, a company that developed the most comprehensive tax resolution application for tax professionals, she spent years researching IRS regulations and procedures on collection issues and advising tax professionals nationwide on how to prepare successful cases.