Question: After having my taxes done by a professional accountant, I learned that I had drastically underestimated by taxes due over the last three years – to the tune of $129,000. My daughter just entered Northwestern this year. My son is set to go to college next year. I can’t afford to pay that much with one check. What can I do? I don’t want to pull my daughter out of school.
Answer: As bad a rap as IRS Agents get, I’ve never heard of any forcing parents to take children out of school. They’re public servants, not heartless monsters, so relax.
Your situation is, in fact, common. Many Americans taxpayers, though either error or neglect, underestimate their taxes due over a period of years until it finally hits them: They owe a nice chuck of change.
It sounds like you are in a position to make good on your debt. Believe me, that’s a positive thing. I’d advise you to contact a qualified tax professional right now. He or she can examine your last three tax filings to make sure your previous accountant hadn’t made an error. Once your exact amount due is figured, you and your tax professional can discuss an installment plan with the IRS. This works very much like a mortgage or car loan – a set monthly payment that will gradually reduce debt without forcing you to change your life, specifically, allowing you to keep sending your daughter to Northwestern.
If for some reason you are and will continue to be unable to pay the $129,000, you may be eligible for an Offer in Compromise. This is exactly what it sounds like. You make an offer to the IRS for the amount of money you can pay, and often the agents will accept it. Believe it or not, this can reduce your tax debt by pennies on the dollar. You should ask your tax professional about this to see if you qualify.