Don't Deal With Tax Debt Like Most People

I've seen so many taxpayers go through it that I know exactly how you feel.

I understand why people stick their heads in the sand.

Trying to take tax debt head-on feels overwhelming, intimidating, and even shameful.

But here’s the reality: waiting to address tax debt only makes things worse, not better.

So, let’s talk about why ignoring tax debt isn’t the answer and what you can do today to take control.

Why Ignoring Tax Debt is Risky Business

Ignoring tax debt doesn’t make it go away—instead, your tax debt grows…a lot.

Here’s what happens when you put off dealing with it:

1. Mounting Penalties and Interest: Every day, your debt increases because of penalties and interest.

What starts out as a manageable amount quickly balloons into a number that seems impossible to tackle.

2. Aggressive Collection Actions: The IRS is the most powerful collection agency in the world. They can garnish your wages, levy your bank accounts, place liens on your property, and seize assets.

3. Impact on Credit and Livelihood: Owing tax debt leads to bank levies and garnishments in addition to hurting your credit score, affecting your ability to secure loans and/or buy a house.

How Most People Try to Solve It: Common Approaches That Don’t Work

When faced with tax debt, the most common reaction is avoidance and/or panic, leading to panic-driven decisions and actions.

1. Denial and Delay: "If I just don’t think about it, maybe it will work itself out."

It’s hard to face something that feels so overwhelming. But ignoring those IRS letters won’t make them stop coming.

The IRS has a memory like an elephant.

And an elephant doesn't forget.

2. DIY Solutions: "I’ll call the IRS and fix things."

This sounds proactive, but it’s actually you making decisions from a place of panic.

Dealing with the IRS isn’t like negotiating a cable bill.

The IRS knows what they're doing (sometimes).

It’s even worse when they don't, because then they do whatever they want, your rights be damned.

People end up saying things that hurt their case, agreeing to terms they can’t keep, or agreeing to unfavorable terms, which makes things worse and potentially way worse.

3. Temporary Fixes: "I’ll borrow money and figure out the rest later."

Sure, maybe that stops immediate collection actions; it doesn’t solve the problem.

Plus, how much interest came with that loan?

Tax debt is stressful.

It’s scary.

But these “solutions” generally lead to more anxiety, more debt, fewer options, and leave you in a very bad situation.

Why Don’t These Approaches Work?

1. The IRS System is Complex: The IRS collection process is based on complex rules, regulations, and processes that you don’t understand.

You don’t know what you don’t know.

Without understanding IRS collections, the deck is stacked against you even more than it already is.

2. Interest and Penalties Pile Up Fast: Every month you delay action, your debt gets bigger. The IRS charges interest and penalties on unpaid taxes, and they add up quickly.

What starts out as a small debt turns into a big-time financial burden.

3. Limited Options Without Professional Help: This goes back to “you don’t know what you don’t know."

Most people have no idea what’s available to them.

There are ways to settle tax debt for less than what’s owed, set up payment plans or pay arrangements where you never pay off your total debt, or even get penalties waived.

But these options are usually only available if you know what you’re doing.

How I’d Solve It Differently:

When you’re facing tax debt, you need to have a clear path forward.

Here’s how I approach resolving tax debt for my clients:

1. Assess the Specific Circumstances: The first step is understanding your circumstances. Look at the full scope of things—what you owe, what you’ve paid, and what returns are unfiled. Then figure out how long the debts will be collectible and whether penalties can be abated.

Then, based on your circumstances, what resolution options do you have?

2. Develop a Strategy: Every case is unique. There’s no one size fits all. Whether it’s negotiating an Offer in Compromise, setting up an Installment Agreement, or seeking penalty abatement, you must develop a strategy-based on your specific circumstances, your finances, and the specific years you owe taxes.

3. Be VERY Careful About What You Say: Make sure you’re not saying something that’s going to put you in a bad situation or back you into a corner. Make sure you're taking the necessary steps so that you're doing what needs to be done to get the best outcome available to you.

4. Maintain Tax Compliance: Resolving tax debt isn’t a one-and-done deal. You must ensure you keep in compliance from now on. If you continue to owe taxes in the future you'll get kicked out of whatever resolution you just negotiated.

Recommended Action Steps: Take Control Immediately

If you’re struggling with tax debt, here’s what you should do:

1. Open Up Those IRS Letters: It’s tempting to just let them pile up, but knowing where you stand is the first step to getting yourself out of trouble.

2. Reach Out for Professional Help: Yea, I'm biased, but I’m also right. It should be clear to see that hiring a tax professional that’s an expert in handling IRS collections is the smart thing to do.

Make sure you protect yourself and that you’re able to resolve your tax debt so that you’re out of trouble but done in a way that's most advantageous to you.

3. Create a Plan and Stick to It: Whether it’s a payment plan, an Offer in Compromise, or another strategy, when you have a plan, you finally have direction and peace of mind.

TL;DR (Too Long; Didn’t Read):

• Ignoring tax debt won’t make it disappear; it only grows bigger.

• Common DIY solutions like denial, delay, and temporary fixes only lead to bigger problems.

• Understand your circumstances, come up with a strategy, be careful about what you say to the IRS, negotiate a resolution that’s most favorable to you and make sure you have a plan to not accrue tax debt moving forward.

• Open those IRS letters, seek professional help, and create a concrete plan.

That Said: Let’s Hear Your Stories

Have you or someone you know dealt with tax debt?

What steps did you take, and would you do anything differently?

Share your experiences below so our community can help.

If you’re overwhelmed, let’s talk about what to do!

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