I remember the day two armed IRS agents in black suits came knocking on my door demanding that I pay a $100,000 tax bill on the spot. Fortunately, I had retained an attorney a month or so before, so I told them to go away and speak to my lawyer. They eventually did, but the experience rattled me. What had I done that two federal agents, with bulges in their suit coats, came to my home?
In 2002 I left my salaried job, struck out as a consultant and stopped paying taxes. It was just too easy to spend money and I was young and had growing up to do. By 2003 I owed $50,000 in taxes so I sold my house to pay off the liability but still wasn’t paying estimated taxes. The money was coming in, however my lifestyle didn’t leave room for taxes. I hired my first attorney in 2005 and paid him a $3000 retainer that was spent keeping the IRS from Levy. I didn’t really understand Levy at the time and what it could do - I did not appreciate the gravity of my situation.
Things calmed down about the time the retainer ran out, however I still didn’t understand what I needed to do. My attorney asked for a few thousand dollars more, which I forked over. He never asked for more or sent me a bill, and the IRS stopped sending letters - it was ‘all quite on the Western Front’. I stuck my head back in the ground.
By 2006, my situation was beyond ignoring, so I hired another attorney and a CPA, paying them about $5000. At about $10,000 into resolving my situation I was finally awake. I still really didn’t have a clue about what my options were other than I made too much money for something called an Offer-in-Compromise. If not that then what?
I paid $15,000 in fees from 2007 until 2009 to a second attorney - I had assigned him power-of-attorney to deal with the IRS so I never spoke to an agent. This was convenient, but cost me a bundle. Every month was a minimum $500 bill if nothing happened; in months were activity kicked up, my bill was $1500 - $3000. We tried several types of Offers-in-Compromise - all rejected. We negotiated expenses with some success and were close to settling when my Appeals Officer retired and my case almost had to start over.
After months of little progress, I released my attorney because I could not longer afford the bills and began dealing with the IRS myself - I had learned a great deal over the years. We settled on a Partial Payment Installment Agreement at an amount that I could afford but for seven years. By the time I am done I will have paid for a house twice over.
The point of this story is that only after I took the time to understand the process and made educated decisions directly with the IRS was my situation resolved. I am not saying that the Tax Professionals did not help, but I probably spent double what I was necessary. My attorney’s were happy to take the money and keep ploughing forward with new options that inevitably failed.
Understand that Tax Professionals who get paid hourly are not in the business of resolving your tax situation quickly, efficiently and cheaply. There is no money in that! The only person that is going to watch out for your pocketbook is you.
Thank you, reader, for reading my blog - my sincere wish is that it provides knowledge that you use to get your situation resolved as cheaply as you can.
