Sam Brotman, JD, LLM, MBA September 30, 2013 5 min read

Beat the Clock: Address Tax Problems Early

One of the most common problems that I see in my practice is a failure of taxpayers to properly address their tax problems in a timely manner. Many taxpayers feel wait for the problem to grow to a point where serious action must be taken in order to be resolved where the problem could have rather been addressed by simple preventative action at the beginning of the problem. Specifically, this happens often in the arena of collections problems and where taxpayers owe a sum of money to the IRS. While I do want to remind taxpayers that it is never too late to properly resolve a tax issue, I did want to discuss some of the added benefits to solving your tax problems early.

One of the biggest advantages of solving tax problems before they start is the ability of taxpayers to significantly reduce the amount of penalties and interest that they may owe to the IRS. For example, those who fail to make the proper amount of withholdings can almost completely reduce any estimated tax penalties by making up their shortcomings by January 15th. Furthermore, taxpayers can minimize the failure to pay penalty, which can cost them an additional 25% of the tax owed by making payments up until October 15th in the year the tax is owed. Finally, any tax payment toward your balance will reduce the amount of interest on the overall liability. Even paying a minimal amount will help to reduce the snowball of accruing tax debt over time.

Too often, I counsel clients who have made their tax problems way worst than necessary by letting them fester. Clients either leave stacks of unopened mail just sitting there or fail to pick up certified letters when they become due. Worst still, clients ignore contact by automated collections or by revenue officers, greatly increasing the chances that the IRS will resort to collection action (liens, wage garnishments, levies, seizures) in order to force taxpayer compliance. Clients give various reasons why they avoid dealing with their tax problems, but often fail to realize that they would be in a lot less trouble if they had tackled their tax problems early on.

As tax problems progress, your account advance to more skilled units within IRS collections. It is much easier to deal with a representative from the balance due department (the first place your account is sent) than to deal with a revenue officer (the most skilled collection agents) later on. In addition, owing a balance due suggests some sort of irresponsibility on the part of the taxpayer, either with poor planning or otherwise failing to meet their tax obligation in some manner. Since some IRS personnel feel very strongly about their employer and their job, it is best to show responsibility by addressing the problem early on in the process. Establishing good faith, either by being responsive to contact made by the Service or demonstrating some sort of plan to pay down your tax liability (in instances where you are requesting to set up an installment agreement), can go along way to getting your desired outcome from the person you are dealing with. Furthermore, making good faith payments (decreasing your overall liability rather than letting a larger balance continue to accrue), often helps grease the wheels when negotiating with the IRS.

Regardless of what your situation is, I assure you that it is best to deal with the problem head on and to alleviate the situation as early as possible. This serves the dual purpose of allowing you to mitigate any potential collection action and increasing your success rate of getting your desired outcome. When in doubt remember the old adage when dealing with your tax problems: an ounce of prevention is worth a pound of cure.

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Sam Brotman, JD, LLM, MBA

Owner and Director of Legal
Brotman Law

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