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What It's Like to be in Business and Owe the IRS Money

Payment Processing

Part 1 of a 4-part series. Read part 2, part 3, part 4.

Issue #1: You're not alone in the way you feel.

While discussing owing taxes to the IRS is not your typical dinner party conversation, it should be known that the story is not new nor is it uncommon. In fact, most people don't realize how common it is. For the better part of 20 years, I have been representing business owners across the country. In that time I have come to know thousands of taxpayers from all walks of life that share at least one connection, owing the IRS money.

In many ways, my clients are representative of good, hardworking people who are in many ways are the backbone of the nation's small business community. Yet, all too often owing taxes is viewed as a negative illustration of a taxpayer's success. In my experience nothing could be further from the truth—in fact, the small business owners I have worked with have generally experienced periods of great success. The tax liability is more often the product of an event or series of events that disrupted the normal course of business. I have heard first hand stories of family tragedy, unforeseeable economic shifts, clients of companies that have gone out of business and left bills unpaid, and other such devastating circumstances.

The IRS has been developing and marketing its message of fear for nearly 100 years while simultaneously treating enforcement as an important part of propping up the voluntary tax system. However, the IRS recently attempted to soften its tone by appearing more reasonable in resolving back taxes. But do not be mistaken about its core mission, which is to protect voluntary compliance while collecting against the tax gap, the term used to describe the amount that is legally due compared to what has been paid. In fiscal year 2014, the IRS opened over 7.5M new collection cases, issued almost 2M levies and filed over 500,000 Notices of Federal of Tax Lien. Yet, despite the numbers that clearly illustrate the reach of this issue it remains one that to each individual taxpayer is very private.

Fast forward to the conclusion of the 2015 fiscal year and the IRS was still owed almost $138B and had over 13M cases in its open inventory. Lower levels of service become a direct result of funding cuts and taxpayers must understand that the system of collecting is not going to feel personable. The IRS is working hard to support compliance with the voluntary system by enforcing against those that do not comply. And while it resources dwindle so too with it will go any chance of improving the collection experience.

If you owe the IRS, you're not the only one. More importantly, there are professionals who have been alongside other taxpayers in the same situation thousands of time. To ensure a successful resolution is to capitalize on the experience of others.


Read part 2, part 3, part 4 in the series.


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David F. Miles, E.A. is a Vice President at 20/20 Tax Resolution, Inc. with over 18 years of tax resolution experience. He holds a Bachelor's Degree in Political Science from the University of Vermont. Miles is an active educator of other tax professionals on a national level and served as an instructor at the 2011 – 2015 NTPI conferences.

This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.
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