Question: I’ve heard a great deal of talk recently about offshore trusts and tax cheats being hunted down by the IRS. I must not have been one of the smart ones. Since opening my business five years ago, I’ve amassed a substantial debt to the IRS thanks first to botched accounting work and then by financial troubles. I never thought to hide the money! I just let the debt pile up. However, I’d like to get square with the IRS. What can I do?
Answer: Perspective is indeed reality. No, no, don’t think you weren’t smart by not entering into an offshore trust scheme. The people who did that are now paying for it. Consider yourself lucky, even if you do have IRS debt.
What you’ve done is not illegal as long as you’ve filed properly every year, and what you’ve done is not uncommon. Millions of Americans have IRS tax debt. In fact, in this troubled economy, IRS problems are even more common.
The first thing you should do is to consult a tax professional. It’s possible, even likely, that you do not owe as much as you think you do. A qualified tax professional will comb through your accounts and filings to find – to the penny – the exact amount you owe Uncle Sam. Why pay more than you need to, right?
Then your tax professional can guide you through the process of approaching the IRS and finding the best way to settle your debt. You could have several options. Since you would most likely be unable to pay off your debt with one check, you could enter into an installment agreement with the IRS that would allow you to take care of your tax debt without hindering your lifestyle. That’s a common solution for many Americans.
Another question is called an Offer in Compromise. If you will be unable to pay your outstanding tax debt, it’s possible for you to make an Offer in Compromise to the IRS. This can sometimes reduce your tax debt to pennies on the dollar.