We've all heard those commercials about the IRS on TV, or radio. The IRS can take away your home! The IRS can garnish your wages and your bank account! Slick voices on those advertisements promise to reduce or eliminate your tax debt, but what's the real story?
Let's go through the basics.
- Tax debt comes in many shapes and sizes, but in general, the first step to solving your tax problems is to get your taxes filed. I cannot count how many clients I've spoken to who complain that they 'owe' the IRS, but have no clue how much because – surprise! - they haven't filed their taxes. Sometimes they realize that they don't actually owe them anything. Getting the taxes filed can be a difficult hill to climb, but until you do it, the pain will keep coming. Morever, since much of tax law and forgiveness is based on time limitations, including liens, the clock doesn't start until you file the taxes. Many of those out-of-state tax 'firms' promise to help you filed your taxes, but often for thousands of dollars more than it will cost you to get them done locally. If you don't own a business and aren't self-employed, with rare exception, you can simply use an inexpensive tax software program to complete your taxes. If you're a business owner or self-employed, it makes sense to use a local hometown CPA in most cases, who can help you and save you money. They know the local state and federal laws that will maximize your savings, and they will do it for less than that mega-company you heard about on the radio.
- You've filed all your taxes, now what? If you owe taxes because you didn't pay them when they were due, either quarterly, or through withholding, you have some options. You can contact the IRS to work out a payment plan, you can file an 'offer in compromise' to reduce the amount that you have to pay, or, you can consider filing a bankruptcy. If the taxes were filed timely, and several years ago, you may be able to discharge them in a Chapter 7, or pay pennies on the dollar in a chapter 13. But whatever you do, you don't want to wait. Putting off these decisions can result in tax liens being filed on your property, or wage/bank account levies. If you're unsure about what to do, call my office so we can go over your choices.
- If your main issue is that the IRS is denying certain deductions you took, and you believe you should have been able to take them, congratulations. You've just qualified for the extremely small percentage of situations where your taxes MIGHT be reduced or eliminated without having to resort to an offer in compromise or a bankruptcy. Why? Because if you've got a good case, this is something that can be resolved through tax litigation. While it can be expensive, it may be worth it depending on the deductions.
What is the bottom line?
- It almost NEVER makes sense to use a one-size-fits-all tax firm for your tax difficulties. They can charge tens of thousands of dollars for work that will cost you much less if you hire a local tax guru or attorney. There's a reason they charge you so much – to pay for their million dollar national ad campaigns. If they promise to get rid of your tax debt, or save you thousands of dollars, buyer beware!
- File your taxes, and if you owe more than you can pay, call me at 248.719.5663, and we will figure it out together!