You May Get a Better Deal from the IRS if You're Flat Broke

It may seem counterintuitive, but one of the least advisable things a taxpayer can do when confronted with a back tax bill from the IRS is wait to deal with the problem until his financial circumstances have improved and he can pay the full assessment, plus penalties and interest.

Any good tax lawyer will tell you it's better to deal with the IRS sooner rather than later, even if you don't have the funds—and you may even be able to negotiate better terms.

Sometimes, it's Better to Negotiate from a Position of Weakness

As a general rule, an IRS revenue officer will not be interested in your promise that “things will improve next year, and I'll be able to pay everything I owe.” For one thing, the agent probably has heard that excuse one thousand times, and in 900 of those cases things have, in fact, gotten worse rather than better. For another, the agent is under pressure to collect as much money from you as he can in the shortest timeframe possible. His boss won't be impressed if the agent says, “Let's leave John Doe alone for a few years. I'm sure his finances will improve and we'll get our money.”

Even if you do, in fact, have good reason to believe your finances will improve in a year, it would be foolish to try to use this fact to deter the IRS. If you're treading water now, the revenue officer almost certainly is aware of that fact, since he's already interviewed your employer, identified your creditors and examined your bank statements.

If you're financially distressed, you may be able to cut a better deal: the IRS will settle for, say, 70 percent of your tax bill, rather than 90 or 100 percent, in the interest of getting its money up-front.

Look at it from the perspective of a somewhat analogous situation. If your brilliant 17-year-old has just been accepted to Harvard, are you better off having scrupulously saved $500,000 in a dedicated bank account to pay for his tuition, or just barely making ends meet like most middle-class families? In the former case, the school may insist that you pay 90 percent of the tuition, while in the latter case, grants and financial aid can cut your bill by a significant amount.

Travis W. Watkins, PC Can Help You with Your IRS Problems

At the law firm of Travis W. Watkins, PC, we know that “common sense” often doesn't figure into a successful strategy for dealing with back taxes. Even if you're flat broke, you may be able to negotiate a better deal on your tax debt than you would if the government left you alone for a few years and you were able to regenerate your nest egg.

Questions? Call our Oklahoma tax professionals today at 800-721-7054 for a free consultation!