Why Not Represent Yourself with the IRS?

I had a conversation this week with a bright enough fellow. He had gotten behind with bills and taken his 401(k) out to live on. Before he knew it, he was hit with the early withdrawal penalty and was soon in serious trouble with the IRS, owing tens of thousands without a way to pay it. He basically called to get as much information as he could out of us in hopes of taking what little information he could glean from our conversation so he could represent himself with the IRS. I strongly encouraged the gentleman not to take that course of action, but at the end of the day, sent him on his way with our best wishes and the reassurance that we would be here to help pick him up even after he made all the mistakes he was sure to make with the IRS. For the record, the worse off your problem, the harder it is to fix, the more it costs to fix, and the longer it takes. So the sooner you address your issues in the right way, the better off you’ll be.

From the Horse’s Mouth

I commented in January about Nina Olson’s report from the National Taxpayer Advocate‘s office regarding her take on just how well the IRS did in 2008. One of the things she discussed at length is the fact that the tax code has become so complicated and convoluted that an entire industry is currently being supported by taxpayers who are simply trying to comply with existing tax laws.

It comes as no surprise that she goes on to discuss the fact that taxpayers with serious tax issues tend to benefit from IRS tax representation. Based on the statistics given by Ms Olson, we were able to draw the natural conclusion she could not explicitly state because of political reasons: Taxpayers are achieving more favorable results if they engage a qualified IRS tax representative.

Dangers of Engaging the IRS on Your Own

I’m going to remove my TaxMasters-hued glasses for a moment and simply record some things you might expect from the IRS if you are one of the self sufficient few who insists on doing this yourself. Before I continue, let me emphatically state that I do not recommend that you engage the IRS by yourself unless you are an enrolled agent, CPA, tax attorney, or another type of tax professional accustomed to dealing with the IRS routinely. With that caveat out of the way, here’s what the IRS has been reported to do when engaging in audits and aggressive collections activities. The IRS can:

• Assume the worst about you–that you are a tax cheat, that you are lying, that you are intentionally and criminally defrauding the US Treasury of funds
• demand that you pay immediately all the money you owe
• When you inform them you can’t pay the full amount they say you owe, set up payment plans you might not be able to afford because the IRS doesn’t ask you about all your expenses and you don’t know which expenses qualify, which don’t qualify, and how to present your bills to benefit your case
• File returns for you when you fail to file, excluding any non-standard deductions to which you are entitled, and then send you a bill to pay the full amount immediately along with all penalties and interest
• Ask you questions in an audit specifically designed to catch you off-guard to uncover additional information the IRS can use against you to collect even more revenue
• Ask your family, friends, neighbors, coworkers, clients, business associates, and employers leading questions about your financial situation, your purchases, your habits, and even your criminal history (whether you have one or not) in an attempt to get as much information against you as possible; and if they refuse to cooperate, there is always the fear of the IRS looking more closely into their affairs
• Take your money and assets regardless of how much you need to make payroll or to pay the bills necessary to keep your household or business solvent

The TaxMasters Benefit

We have made a living at TaxMasters by knowing what to expect from the IRS and by using their own rules, tendencies, and habits to protect our clients. For the do-it-yourself tax negotiators, I have a vital point to make. If you are facing an IRS problem, regardless of how you arrived at that problem, you are different from TaxMasters in one very important aspect. While you are facing uncertainty and fear about facing the IRS head on, we don’t have that fear at TaxMasters. We don’t fear negotiating with the IRS because we know their rules and we study their tactics and tendencies. We don’t get caught off guard or surprised by the IRS tactics that tend to strike fear into taxpayers.  We are successful at negotiating with the IRS because we do it every day and understand what constitutes a real threat and what IRS actions amount to nothing more than a toothless bark. It’s far easier to stop a punch if you know exactly when and how it will be thrown.

It’s Your Call

So think about it, yes? Those of you feverishly working through the latest do-it-yourself book or tax prep for dummies paperback, take a minute to think this through. Even if you are up to all the technical aspects of negotiating with the IRS, do you know when your negotiation tactic can be considered criminal? Do you know what questions the auditor can ask in an audit and how to redirect the auditor if they step out of line? Are you ready to use the law not only to represent yourself, but to hold the IRS agent pounding on your door accountable?

But even more important than any of these things… If you are afraid of the IRS, they will exploit that fear and are likely to take from you far more than you, or we, think is fair.

Until you need us,

Patrick Cox TaxMasters