Behind on taxes? There is a way out, and it usually starts with your books.
Unfiled years, a balance you can't pay, letters you've stopped opening. Here is how back-tax problems actually get fixed, in the order they get fixed.
You are not the first person to fall behind, and you won't be the last.
After more than 5,000 conversations with people in tax trouble, one thing stands out: almost none of them were lazy. They were busy. They were working in the business so hard that the books, the filings and the estimates slid, one quarter at a time, until a letter showed up.
The good news is that the IRS has a defined process for almost every situation. The fix is rarely one dramatic move. It is a sequence: get the numbers right, get the returns filed, then choose the right way to resolve what's left.
Bookkeeping cleanup: get the real numbers.
Most back-tax problems start in the books. When records are missing or business and personal money are mixed together, two bad things happen: returns don't get filed, or they get filed without the expenses you were entitled to. Either way, you pay tax on money you didn't really make.
So we rebuild the books first. Bank and card statements, invoices, payroll, equipment and vehicle purchases, all reconciled year by year, so every return we file reflects what really happened.
This step is where the money often is. A roofing company doing about $350K a year came to us four years behind with more than $100,000 owed. Once the books were rebuilt and the returns showed the real numbers, the balance dropped by $60,000.
Filing back years: get compliant before you negotiate.
The IRS won't agree to a payment plan, an offer or a hardship status while returns are missing. Getting current on filing is the price of admission for every other option.
- We pull your IRS transcripts. They show what the IRS has on file: income reported by others, returns received, balances, penalties and any collection activity.
- We figure out which years to file. The IRS generally looks for the last six years to consider you current, though every case is different.
- We replace IRS-prepared returns. If the IRS filed a substitute return for you, it likely counted your income and none of your expenses. A correct return can often bring that bill down.
- We file business and personal returns together. So the numbers line up across your entity, payroll and personal return.
Penalty relief: don't pay penalties you may not owe.
Penalties and interest can make up a large share of an old balance. Interest generally can't be removed on its own, but penalties sometimes can, and interest on a removed penalty goes with it.
First-time penalty abatement
An administrative waiver for failure-to-file, failure-to-pay and failure-to-deposit penalties, available to taxpayers with a clean penalty history for the prior three years.
Usually a fit when: this is the first year you've had a problem in a while.
Reasonable cause
Relief when something outside your control kept you from filing or paying on time, such as a serious illness, a disaster or records you couldn't get. It has to be documented.
Usually a fit when: a real event explains the gap, and you acted once it passed.
Resolving the balance: the options the IRS offers.
Once the returns are filed and the balance is right, we look at your income, expenses and assets to find the option that fits. Here they are:
Installment agreement
A monthly payment plan. Smaller balances can often qualify with minimal paperwork; larger ones need a full financial statement. Penalties and interest keep accruing, but collection actions like levies stop while you stay on the plan.
Usually a fit when: you can pay the full balance over time.
Partial-pay installment agreement
A monthly payment based on what you can actually afford, even if it won't pay the full balance before the IRS's collection window closes. The IRS reviews it periodically.
Usually a fit when: your realistic payment is less than what it would take to pay it all off.
Offer in compromise
A settlement for less than the full amount, based on what the IRS calculates it could collect from your income and assets. It is real, but it is narrow, and most people who are told they'll “settle for pennies on the dollar” don't qualify.
Usually a fit when: your income and equity are low compared to what you owe, and that's unlikely to change.
Currently Not Collectible
A hardship status that pauses collection when paying would leave you unable to cover basic living expenses. The debt doesn't go away and interest continues, but levies and garnishments stop while the status lasts.
Usually a fit when: you can't pay anything right now without real hardship.
Got burned by a big tax firm already?
You're not alone. One of our clients came to us after a frustrating, expensive experience with a large tax resolution company. We got her business set up correctly, on payroll, saving for retirement and on a payment plan she can afford.
Keeping it fixed: so you're never back here.
Every client who has called us about the IRS had the same four things going on underneath: books that weren't kept up, no structure for paying themselves, business and personal money mixed together, and nobody looking ahead. The IRS letter is just where it finally shows up.
Resolving the balance without fixing those four things means a new balance next year. So the last step is building the system: monthly books, a real owner payroll, a set-aside for quarterly estimates and the right business structure. That's the work our tax strategy and fractional CFO services are built around.
“He never judged me or made me feel foolish. Instead, he patiently explained every step, gave me a plan, and kept me accountable.”
“Tom doesn't just prepare the taxes and send you on your way.”
Will the IRS come after me if I file old returns now?
Filing voluntarily is almost always better than waiting for the IRS to act. It shows good faith and opens the door to payment options and penalty relief.
I got a letter. How much time do I have?
It depends on the letter. Some are routine notices; a final notice of intent to levy has a short window to request a hearing. Send it to us and we'll tell you where you stand.
Can you talk to the IRS for me?
Yes. As an Enrolled Agent, Tom can represent you before the IRS with a signed power of attorney, so you don't have to take those calls yourself.
Can you guarantee a settlement?
No one honestly can. Anyone who promises a specific result before seeing your transcripts and financials is guessing. We'll tell you what's realistic after we look.
What does it cost?
It depends on how many years need to be filed and how complex the books are. We'll scope it on the intro call before you commit to anything.
Find out where you really stand with the IRS.
One short call. Tell us what's going on, and we'll tell you plainly what the path forward looks like.