Eliminating Back Taxes

Q: My husband and I owe in excess of 31,000.00 in back taxes. We have learned all too well that our ignorance of tax witholding laws is no excuse to the IRS. I would like to know how to choose an agency that can help us to eliminate or reduce our tax debt to a level that we can pay. We are so afraid of the multitudes of options from companies claiming to be able to help us and want to choose a reputable company. What advise can you give?

A: Back taxes are like any other debt, with one big difference: the IRS has a lot more power to hurt you than any other creditor. For example, they can attach your bank accounts and simply take your money without jumping through nearly as many legal hoops as a private creditor. In addition, many IRS debts can’t even be eliminated by declaring bankruptcy. So if you’re going to owe money you may have trouble repaying, the government is probably the last entity you should owe it to.

That being said, this debt can be approached much like any other… you can attempt to negotiate it yourself, or you can hire someone to do it for you. Since this amount is so large, I think you’re right to try to find help. Here’s what I’d do: rather than respond to some ad on TV or radio, I’d attempt to find a good local tax attorney or CPA to represent me. My accountant, for example, is a former IRS employee who knows many of the local IRS folks personally. He also has about 30 years experience in dealing with the IRS. So these are two obvious things to look for: connections and experience. If you don’t know any tax professionals yourself, you’ve got two choices: ask friends for referrals (in general, the more well-heeled the friend, the better) or simply call your state society of CPAs and ask for a list. Interview a few, then pick one. Ask them exactly how they would handle your situation, how much experience they have with similar ones, and how much they’d charge. (And that fee, by the way, should be hourly, not a percentage of what they save you.)

When it come to any actual negotiation, this is an opportunity to learn how to get what you want in virtually any negotiation. And that is by having a specific request, backing it up with as much factual information as possible, and being prepared to respond to counteroffers. In the case of your debt, you should request a specific reduction, then provide evidence of why that reduction is all you should…or can…pay. So forget excuses about why you’re in this position: focus on precisely explaining what you can afford to pay and when. So you’re going to do is to you show up with a specific plan: you’ll have a budget showing your exact income, your exact expenses, your exact savings balances, if any, and exactly what you feel you can afford monthly. In other words, rather than essentially saying “Geez, IRS guy, we didn’t know what we were doing…give us a break, wouldja?” you’re going to do something much more professional and businesslike. You’re going to be showing up saying something more like this: “We screwed up, but let’s focus on the future, not the past. We owe $31,000. We can afford to pay $1,000 today, then another $15,000 by making monthly payments of $200 for the next 75 months.” Then you pull out supporting documents and show the IRS exactly why that’s fair and what you can afford. Then you wait for a counter-offer from the IRS.

That was an example, of course: in real life, you may not say anything at all to the IRS…your professional will most likely do the talking for you. But you might find that professional more easily…and get charged less for their services…if you start preparing that information now and presenting it to the professionals during the interview process. The more organized you are, and the less emotional you are…the faster and better your outcome will probably be.

Hope that helps…and good luck!

Regards,
Stacy

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
15 Ways Retirees Can Make Their Savings Last Longer
15 Ways Retirees Can Make Their Savings Last Longer

Study these strategies to make your golden years gleam.

12 Easy Ways To Make Make Money Online Without Leaving Home
12 Easy Ways To Make Make Money Online Without Leaving Home

If you’re hanging around the house a lot these days — and who isn’t? — use your time to make some extra cash.

7 Bank Accounts With Extra Perks for Seniors
7 Bank Accounts With Extra Perks for Seniors

These accounts offer exclusive discounts and other perks — including interest — to older customers.

8 Surprising Things No One Tells You About Retirement
8 Surprising Things No One Tells You About Retirement

Knowing what to expect can help you prepare for — and adjust to — life in your golden years.

These Are the 10 Worst Cars for Depreciation
These Are the 10 Worst Cars for Depreciation

Two types of vehicles are especially likely to see steep plunges in value.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

How to Buy Gas At Costco Without a Membership
How to Buy Gas At Costco Without a Membership

The warehouse club often has some of the cheapest gas in town. Here’s how you can get it as a nonmember.

10 Things to Stop Buying If You Want a Clutter-Free Home
10 Things to Stop Buying If You Want a Clutter-Free Home

If you like to keep things simple, avoid these purchases.

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

Vacuums from this brand can last a half-century, if not longer — and they’re hot on the resale market.

A Simple Way to Silence Robocalls Today
A Simple Way to Silence Robocalls Today

A few steps can keep your phone from ringing when a spammer calls.

This Company Makes the Best Tires in America
This Company Makes the Best Tires in America

Driver satisfaction with tires is at an all-time high, but one brand stands out.

This Health Issue Can Hint at Dementia Years in Advance
This Health Issue Can Hint at Dementia Years in Advance

One type of pain is especially associated with cognitive decline.

Can I Switch to Spousal Social Security Benefits When My Ex Dies?
Can I Switch to Spousal Social Security Benefits When My Ex Dies?

Knowing when to claim can help you maximize benefits.

36 Things That Will Be Obsolete Soon
36 Things That Will Be Obsolete Soon

The writing is on the wall for dozens of things we have grown up with.

Medicare Will Not Cover These 6 Medical Costs
Medicare Will Not Cover These 6 Medical Costs

Don’t let these health care expenses catch you off guard in retirement.

8 Things You Should Always Buy on Amazon
8 Things You Should Always Buy on Amazon

The giant retailer shines when it comes to these things, from basics to hard-to-find specialty goods.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

8 Federal Income Tax Breaks for Homeowners
8 Federal Income Tax Breaks for Homeowners

Some of these deductions and credits are available to a wide swath of homeowners.

5 Ways to Fill Your Pantry With Free Food
5 Ways to Fill Your Pantry With Free Food

Anyone can take advantage of these resources.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

6 Reasons You Should Stop Hiding Cash at Home
6 Reasons You Should Stop Hiding Cash at Home

Stashing money around the house is anything but harmless.

5 States With the Worst Health Care for Retirees
5 States With the Worst Health Care for Retirees

All of these states are located in the same region of the nation.

5 Products You Should Never Buy Generic
5 Products You Should Never Buy Generic

Sometimes the brand-name version is clearly superior.

This Cellphone Carrier Has the Worst Network Quality, Customers Say
This Cellphone Carrier Has the Worst Network Quality, Customers Say

One major wireless provider stands out for the least reliable call, messaging and data services.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.