The 5 Biggest Mistakes People Make with the IRS
After 32 years of IRS work, I see the same mistakes over and over. Here is how to avoid them.
Mistake #1: Doing nothing. Every month of inaction adds penalties and interest. A $20,000 problem becomes a $50,000 problem. Ignoring the IRS is always the most expensive option.
Mistake #2: Not filing returns because you can't pay. File the return anyway. The failure-to-file penalty (5% per month) is ten times higher than the failure-to-pay penalty (0.5% per month). Filing without paying saves you money.
Mistake #3: Hiring a national "tax relief" firm based on a TV ad. Most charge $8,000-$15,000, hand your case to an underpaid case manager, and deliver mediocre results. Do your homework.
Mistake #4: Calling the IRS yourself without understanding your options. Anything you say to the IRS can be used against you. And once you agree to a payment plan, it's hard to renegotiate.
Mistake #5: Filing an Offer in Compromise without running the numbers first. A rejected OIC wastes 6-12 months, tolls the collection statute, and you still owe the full amount.