“My tax issue is…

I Can’t Afford to Pay the IRS!”

WARNING: FOUR Destructive Mistakes Some People Who Can’t Afford Their Taxes Almost ALWAYS Make!

There’s nothing worse than having an IRS problem!  And if you’re reading this article, you probably have a tax problem BUT you’re not quite sure what to do next!

It’s a confusing contradiction…I mean, you would have just PAID the IRS in the first place if you had the money, right?  But if you lost your job, got hit with a medical condition, had a business fail…how can they expect you to PAY what you don’t HAVE?

If you’re one of literally millions of people who are having IRS problems, I want to WARN you about FOUR destructive misconceptions that will SINK your standing with the IRS, and allow them to LEGALLY siphon thousands of dollars from your bank account, your wages, and your life savings!

But what if you avoid these mistakes?

If you understand your situation, understand how the game is played, and avoid making a destructive IRS mistake, you can FORCE the IRS to STOP, to respect you, to listen to you, and ultimately, to agree to a fair resolution that allows you to get the IRS out of your life, ONCE AND FOR ALL!

Mistake #1: “I can’t afford to pay, so that’s a reason not to take action”

Very few people I see are having a tax problem because they are lazy, or they simply decided “I’d rather not pay my fair share!”.  Rather, it’s usually because of something catastrophic in their life:

  • A business that failed
  • Job loss
  • Medical condition
  • Being taken advantage of by an unscrupulous ex-spouse
  • Getting a big audit adjustment based on a tax position you thought was acceptable at the time

If one of those describes you, you’re not alone!  And if it’s causing you to have difficulties paying your taxes, that doesn’t make you a bad person!

But…

The IRS has no way of knowing what’s going on in your life if you make zero communication with them!

What are they going to assume if they hear nothing from you?

That you’re simply trying to avoid your responsibilities under the law!

So they go into hunting mode.  They send you a bunch of letters.  They file returns FOR YOU (no, this is not a way to save on tax prep fees!  Usually, what they say you owe is in excess of what you actually do).  They start to take money out of your bank account.  They start to siphon your wages.  They file a lien against you…

…But if you had acted earlier, when the problem actually started, you could have avoided ALL of the misery of dealing with the government’s ravenous tax collector!

Your circumstances DO matter and WILL be taken into consideration by the IRS!  HOWEVER, simply going incognito and trying to float under the radar NEVER, NEVER works in the long term.

Mistake #2: “Penalties for not following through are just a slap on the wrist.  So I’ll get around to it when I can.”

I’ll start this section out with a statistic that will rapidly change your mind:

The IRS assessed and sustained about $9 BILLION in penalties against individuals in 2014!

And of the many different types of penalties the IRS can assess against individuals, failing to pay was the one most frequently assessed, and with the greatest dollar amount imposed!

And failing to FILE was right behind it.

Penalties are actually a very lucrative area for Uncle Sam and the IRS.  It’s free money to them!  And they are more than happy to impose them against you whenever they see the chance.

Here’s the penalties most taxpayers come up against:

  • Failure to file.

Didn’t file your tax return by April 15th (or October 15th if you have it on extension)?  No problem!  That’ll be an additional 5% per month up to 25%!

So if you file 5 months late, and owed $1,000, you now owe $1,250.

  • Failure to pay

If you don’t pay by April 15th, you owe 1/2% per month, up to 25%.

  • Interest

This is not technically a penalty, but it is on top of and in addition to the failure to file and pay penalty!  Right now, it is 3% per year, but will continue to rise as general market interest rates set by the Federal Reserve go up.

ALL of these penalties, and interest are concurrent.  So you don’t just get one or the other.  They all kick in, as applicable, at the same time.

And they are CUMULATIVE.  The failure to pay penalty becomes a penalty on top of a penalty!  The same with INTEREST.  It’s basic compounding, and if left unchecked, penalties and interest WILL literally DOUBLE your tax liability.

To you, it’s your life savings.  To the IRS, it’s free money, just waiting to be plucked from the tree.

Mistake #3: “The IRS is out to seize my house / car / life’s savings, and there’s nothing that can be done!”

A lot of people think of IRS collections like a Mafia henchman…a big, muscular, somewhat dimwitted guy who comes around to your house with a crowbar, slashing your tires and stealing your furniture, yelling “where’s the money, Smalls!”.

And the IRS of long ago was a bit like this!

Today, though, the systems in place to PROTECT honest, well-intentioned but delinquent taxpayers are STRONG and DEFINITIVE.

  • The IRS cannot put you out of house and home, and on the street, just to collect a tax debt!
  • They can’t make you unable to provide basic necessities for yourself, or your family!
  • They’re not allowed to communicate with you directly if you’ve appointed a representative!

And most importantly: IF you know HOW to play their game, communicate with them on their level, and make the case that you are working towards resolving your tax issue once and for all, they WILL treat you with respect, and they WILL allow you an alternative to paying everything, right now!

So I advise all of our clients to RELAX!  If you are taking definitive action to fix your tax issue, and you’re working with a qualified adviser, there is light at the end of the tunnel.

But if you’re doing nothing to address your issue, the henchman and ravenous wolves WILL come out of the woodwork.

Do you want to deal with them?

Mistake #4: “Someone on TV said I could wipe out my tax debt for ‘pennies on the dollar’, so I have nothing to worry about!”

It’s true that SOME people DO qualify to have their tax debt wiped out for pennies on the dollar (an offer in compromise)!

Frankly, you’re probably not one of them.

Why?

Think about it logically.  The IRS’ goal is to collect as much money as it possibly can.  If it gave away its offer in compromise like a bowl of candy in a waiting room, how much do you think they’d actually collect?

In fact, the IRS only accepts about 25% of the offers in compromise that are submitted to it!  That’s only 1 out of 4!

For people that qualify for an offer in compromise, it’s a great way to conclude their tax problem and get the IRS out of their lives, once and for all!

“If it’s so hard to get, why is it advertised so widely on TV and the radio?”

An old adage in business is to give the customer what they want.

Who doesn’t want to only pay pennies of what they owe to the IRS?

We all want to live in a mansion, drive Ferrari and fly on a Gulfstream to Saint-Tropez for a long winter holiday.

But being unrealistic about the options for IRS resolution that are available to YOU because of YOUR unique situation is daydreaming, not problem-solving.  And hiring someone to pursue a daydream resolution is pure fantasy…an expensive fantasy that amounts to nothing.

 

 

 

 

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NB this piece should be written in a casual, conversational manner. The ending objective of these pieces is ALWAYS to push people towards action.