I owe a back tax bill of $50,000 to the IRS. My revenue officer says I may wind up in jail if I don't settle soon. What should I do?

Well, you certainly shouldn't panic. You have to remember IRS agents are trained to extract as much money as possible, as soon as possible, from the “clients” to whom they have been assigned. It's not at all unusual for a revenue officer to intimidate an otherwise law-abiding citizen with the threat of jail.

Ideally, you should have an experienced tax lawyer at your side during your first IRS interview. Your lawyer would quickly squelch an agent's overzealousness and get down to some genuine negotiation.

The fact is it is extremely rare for the IRS to level a criminal penalty at a taxpayer who owes the government as little as $50,000, especially if the transgression involves only one year of unfiled or underpaid taxes.

Generally, the only people who receive prison time are those who owe hundreds of thousands or millions of dollars' worth of taxes, and who have actively attempted to defraud the government (for example, by not reporting income, claiming imaginary dependents, or paying their employees in cash in order to avoid payroll taxes).

Does this mean you're free and clear? Not necessarily.

If an IRS revenue agent takes a particular dislike to you, and if you have accrued your $50,000 debt over five or ten years' worth of tax wrongdoing, jail time may well be in the offing—though only a few months at most, not the multi-year-sentences handed down to big-time offenders.

For questions about your tax situation, call the Oklahoma tax experts at Travis W. Watkins, PC (800-721-7054) to learn more about your options!