"I owed the IRS $10,000"

I have some serious (?) questions about those Optima Tax Relief commercials...

1. How negligent in your taxes do you have to be to owe the IRS $10,000 in taxes ?

2. Hasn't the IRS put a lien on your property by now, or taken other action ?

3. Why do these commercials mostly use minorities sitting at a kitchen table in a dingy kitchen ? I've never seen a white man sitting behind a big desk, dressed in a suit confessing he owes the IRS $10,000 in taxes. Nor do I see his wife sitting on the sofa in their penthouse apartment saying she owes $10,000 in taxes.

4. What does Optima do to lower your delinquent income taxes to the IRS from $10,000 to something you can afford to pay ? I never heard the government being willing to negotiate money owed to them due to the taxpayer's delinquency. If true, we'd all be doing that.

[quote]1. How negligent in your taxes do you have to be to owe the IRS $10,000 in taxes ?

Setting aside that it sounds like a scam, your first question is easy.

The IRS charges interest and penalties for delinquent taxes. It would not take more than a small error 5 years ago to create a $10K tax debt.

OP: Item #4-Google “IRS Offer in Compromise.”

R4 - thanks. I never realized they did this. More Americans should take advantage of this.

R1 - thank you !

Small business owners often don't know how to properly withhold or remit payroll taxes (FWT, Social Security and Medicare) taxes.

Self employed people don't realize you pay the social security tax on the profits of your business. This is a flat tax of @15%. (W2 employees pay only @7.65%; self employed people pay both the employer and employee share). So for every $1K in profits, you pay $150.00 in social security and Medicare taxes in addition to federal wage tax. It doesn't take a lot of profit before one could end up owing thousands of dollars in taxes in a single year.

Add on the interest and late charges, and this debt mounts up real fast.

After 40 years of dealing with the IRS, I've learned one thing: they are reasonable people and they DO NOT want to bankrupt people (the Republican bullshit propaganda to the contrary notwithstanding). They are willing to work out compromise deals. If you work out an installment plan to pay back taxes, they want you to live up to your commitment. If you can't make your payment, you have to communicate that to them. The worst thing you can do to the IRS is cut off communications with them or ignore them. Ignoring them is when the big trouble starts.

Most Americans do, r5.

I’m sorry your accountant never told you about it.

[quote]Add on the interest and late charges, and this debt mounts up real fast.

Interestingly, the IRS also does interest the other way.

I had my taxes done by my accountant and received a refund. The following year when I was gathering my prior year’s forms I realized he didn’t write off my mortgage interest. I told him about it and we submitted a correction to the prior year’s taxes.

They sent me a check for more than I thought it should have been. I called him up and he explained they also PAY interest. I was shocked.