That’s exactly what we do. We negotiate to bring the entire balance down, not just interest, not just penalties, but the total amount due. That’s our main bread and butter. There are two ways to get a tax liability reduction. One is called Doubt to Liability, and the other is called Doubt to Collectability. Doubt to liability means exactly what you think it would. In simple terms, you are claiming that you do not owe this debt and must prove to the IRS that your claim is true. From a legal standpoint, these are more fun in my opinion. However, these cases are very rare. I’ve had a couple in the past, but, for the most part, it’s not a question of whether the taxpayer owes the tax or not.
Instead, the bigger bulk of the clients fall into the Doubt to Collectability category. If you fall into this group, you admit that you owe the debt but you also admit that you cannot afford to pay it. This is where I have fun from a numerical standpoint because, in a prior life, I wasn’t an attorney; in a prior life, I was an accountant. I love numbers contrary to most attorneys, and this method of negotiation involves an extensive numerical analysis of the client’s financial situation. My first step is to evaluate the client’s circumstances to determine what they can afford to pay. As an example, let’s say a client comes in and owes $100,000 in taxes. However, if, after my analysis, I determine that their economic situation only allows them to pay $20,000. My next step is to work directly with the IRS to reduce my client’s liability to that $20,000 that they can afford and set up a payment plan.
Truthfully, I can’t say that every single time I have made an offer to the IRS they have accepted it. However, I can say that every time I’ve submitted an offer, I’ve been able to get it reduced so that our client is paying less than they originally owed. For example, we had a client who owned a business, went back to school, and he owed about $65,000-70,000 in tax liability. I got him down to $7,000, and we also set up a payment plan for the $7,000. I like to use this client as my go-to example because his experience shows how rewarding and liberating this process can be. Not only do you have the opportunity to reduce your back taxes, interest, and penalties, but you can also pay the left over sum over time so you never feel overly burdened by this debt again.
It’s important to remember, however, that not everybody qualifies. I have had clients that I, unfortunately, was unable to help. One in particular owed $75,000 to the IRS. After looking at his financials, I learned that he had virtually no expenses and a significant amount of annual income. He owned multiple properties with little-to-no mortgage left on them and no dependents to claim. I had to tell him, “Hey, you’re doing great. There’s no justification as to why you cannot pay back this debt.” We ended up setting up an installment agreement so, at the very least, he has the luxury of paying it off over time and not have the IRS garnish his account or place liens or levies against him.
Everybody’s scenario is different, but, at the end of the day, my goal is to assist my clients to the very best of my abilities, and I make sure I do exactly that.