Can The IRS Come After My Husband For Tax Related Identity Theft Due to His Father?

Question: My husband’s father owned a convenient store that he put under my husband’s name. His father didn’t pay taxes for a year — and  now the IRS is going after my husband, since the store is under his name!

He didn’t acquire any profits, as it was his father’s store. My husband was in Texas at the time his father had this issue in Illinois. We are dealing with a $40,000 fee. Is there a way to get out of this situation?

This happened before we got married. Can the IRS come after my paychecks?

— Nida in Pennsylvania

Jacob Dayan answers…

This question is very difficult to answer with the information provided, but I’ll do my best to try and put your mind at ease.

First off, in the interest of being completely transparent, this is a very serious situation and should be handled with extreme urgency!

Now, that being said…

If he didn’t know his dad committed tax identity theft

If your husband’s information was used without his knowledge or consent, then you should consider that identity theft — and treat it like a crime. Here’s what your husband should do:

  • File a police report locally.
  • Contact the IRS and let them know this was caused by identity theft.
  • Your husband will need to file an Identity Theft Affidavit with the IRS, explaining all the details he knows to be true regarding the situation.
  • In the Identity Theft Affidavit, he should include the police report and any notices about the issue.

While it won’t be a short process, odds are you can resolve this situation eventually.

If he did know

What if your husband consented to the business being owned under his name and run by your father-in-law? Then, unfortunately, he can be held responsible for any tax responsibilities for the business.

Since Texas is a community property state, this also means that you can be collectible for any of your husband’s tax debts, even though you are not liable for them. If both you and your husband are collectible for the debt, then there are options available to protect your paycheck. But depending on what stage of collections the IRS is in, time may be of the essence.

What to do now

I highly recommend seeking representation by a licensed tax practitioner. This situation is not uncommon for our professionals, and we would be happy to have a preliminary discussion and investigate your situation. Either way, we wish you and your husband the best of luck in resolving this matter!

Jacob Dayan is co-founder of Community Tax LLC, a full-service tax company helping customers nationwide with tax resolution, tax preparation, bookkeeping, and accounting.

How Long Should I Keep Receipts For Tax Purposes?

Question: How long should you keep receipts? I am not sure if I should keep receipts for auditing or because I may need to amend a return. Is there a rule of thumb in taxes in regards to this?

— Michelle in California

Jacob Dayan answers…

When it comes to taxes, sometimes the simplest questions have the most complicated answers. In your case, Michelle, it’s more vague than complicated. That’s because there’s no one right answer to how long you should keep receipts — because the time frame really depends on the type of income or expense the receipts support.

Let me take a stab at breaking this down so you have useful information to make an informed decision…

A few years — or forever

According to IRS Publication 1035 (Rev. 9-2017) — yes, that’s the intimidating title — “the IRS can include returns filed within the last three years in an audit. If we identify a substantial error, we may add additional years. We usually don’t go back more than the last six years.”

OK, so that’s one answer: No more than six years.

But then there’s Publication 583 (January 2015), which instructs taxpayers to keep records for “as long as they may be needed for the administration of any provision of the Internal Revenue Code.” What does that mean? It continues:

Generally, this means you must keep records that support an item of income or deduction on a return until the period of limitations for that return runs out. The period of limitations is the period of time in which you can amend your return to claim a credit or refund, or the IRS can assess additional tax.

As you can see, the length of time depends on exactly what the receipt is for.

What you should do anyway

Here’s what I recommend regardless.

First, keep good records and receipts to protect yourself in the event of an audit. The IRS may audit personal income tax returns going back three years from the due date, or two years from the time the tax was paid (whichever is later).

If you’re not sure if you owe tax debt, check out’s page What Is Tax Debt?

In situations where a tax return was never filed, or a fraudulent return was filed, you must keep receipts forever. If a return did not include all income, and the omission is greater than 25 percent of the income claimed on the original filing, records must be kept for six years.

Finally, employment tax records must be kept for four years after the due date or payment date — again whichever is later.  If you own a small business, or if you’re self-employed, I recommend looking into a bookkeeping/account solution. My team offers free consultations, and we can help you understand all of your options. You can reach us through Hope this helped.

If you need help to settle back tax issues with the IRS, can connect you with an accredited tax resolution specialist.

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Why Do I Have to Pay Taxes on a Debt That’s Been Written Off?

Question: If a credit card account has been discharged that enables a tax write-off for the unpaid credit account, why is the debtor required to make payments, as the account could be placed in collections? I view that to be a deceptive practice.

— Laurie in California

Jacob Dayan answers…

That is a great question. The answer to your question is relatively straightforward — but as always, I have to caution you that everyone’s tax circumstance is different.

As such, it is often advisable to speak to a tax professional prior to making any decisions related to the information provided on a website — including this one. That’s why has experts you can call anytime.

Before I break down the answer, let’s review some basics about collections and taxes…

[Community Tax co-founder Jacob Dayan]

Why do I have to pay taxes on a debt that’s been written off? And this is Taxing Questions.

Hi, I’m Jacob Dayan, CEO & Co-Founder of Community Tax

Your credit card might be plastic, but the company that issued it to you deals in paper. So, you can’t write off any cancellation of debt until the credit card company issues you a form called a Cancellation of Debt. This isn’t an uncommon situation, but it is a confusing one to many people.

In fact, if I’m asked to rate the difficulty of this topic on a scale from 1 to10, Cancellation of Debt is around a 7.

You might ask, why so high? Because the IRS and your credit card companies don’t advertise the solutions to your problem. And while they aren’t hiding them, either. Trying to figure out a Cancellation of Debt on your own is both time-consuming and confusing.

Having someone on your side, looking out for your best interests, can save you thousands of dollars. If you call, you can consult with myself or a member of my team right away.

The rule

The short answer is that a credit card company will “write-off” a debtor’s balance after months, if not years, of collection efforts. The credit card company will issue the debtor and the IRS a 1099-Cancellation of Debt.

What this means is that the debtor — you — is then required to pay income tax on the amount of debt that was canceled or forgiven. The IRS essentially treats any unpaid forgiven debt as income. And you definitely don’t want to ignore the IRS. If you want to know what happens if you do, read the report, Understanding the IRS Collections Process.

The exception

There is, however, an exception to the requirement of paying taxes on any canceled credit card debt. A taxpayer will not be responsible for paying taxes if they can prove they are insolvent at or before the cancellation of debt.

Insolvent means that you have no assets, and your financial situation is upside down. Credit card companies will generally wait three years before issuing a 1099-Cancellation of Debt. Why? Because they must show a consistent attempt to collect the unpaid balance. (This is just part of the rules that govern collections. Read more at How Debt Collection Works.)

Credit card companies are not in the litigation business, so they tend to sell past due accounts to law firms that will collect on the outstanding debt. If a credit card company fails to collect after roughly six months they may engage a collections law firm to take over collections. The law firm will try to work out payment of the debt prior to filing suit in civil court. After three years of attempting to collect, the credit card company will finally “write-off” the debt and issue a 1099-Cancellation of Debt.

I hope this helps clear things up. If you have any other questions, my tax team can give you a free consultation. Just call

Is Withholding Taxes On Sales Commissions “B.S.”?

Question: I just started working for a construction contractor, helping him find leads for future customers. He says he wants to “minimize risk” while paying me commissions on any jobs I give him leads on. That means I have to choose between:

1. letting him take withholding taxes from my commissions, or 

2. filing for an LLC or a corporation. 

I am a sole proprietorship. People are supposed to send me 1099s, but he’s not going to do that unless I have a corporation or an LLC. Is he really minimizing his risk? Or is this B.S. or what?

— Pete in California

Jacob Dayan from Community Tax answers…

Is it B.S.? Yes and no. I would call it an “imperfect application of common tax principal.” Let me explain.

In the small business world, there are few words more dangerous than “employee.” It’s a dangerous word because businesses with employees have many additional requirements — and pay extra taxes — than businesses with independent contractors alone.

For example, businesses with employees are required to…

  • withhold income and FICA tax from employee paychecks
  • pay 50 percent of the 15.3 percent FICA tax for each employee
  • file and pay payroll taxes
  • issue annual W-2 forms, among others

Because many small businesses want to avoid the extra time and expense needed for carrying official employees, there is pressure to classify as many workers as possible as independent contractors.

But the test on whether a worker is an employee or independent contractors has nothing to do with the label attached to the relationship. Rather, it’s how much control the small business has over the worker: scheduling, training, evaluation systems, degree of instruction, etc.

Distinguishing employee from contractor

The more control, the more likely that worker is an employee and not an independent contractor.

The IRS has the power to reclassify workers as independent contractors, and when they do, they can levy massive penalties on a small business.

Many small businesses think they can limit the risk of an IRS reclassification challenge by requiring their independent contractors to obtain an EIN. “If a business is paying another business,” the thinking goes, “the relationship is more likely to be considered an independent contractor relationship and not an employer/employee relationship!”

However, the test on whether a worker is an employee or independent contractor is based much more on control than on the labels the parties attach to one another. So paying a person with an SSN or a business with an EIN doesn’t make much difference.

Now, with all that in mind, let’s get to today’s question…

Based on the facts, it appears the construction contractor is giving you the choice of being classified as an employee and having taxes taken out, or as an independent contractor. If you choose the independent contractor route, the construction contractor is trying to limit the risk of you later being considered an employee and IRS levying penalties against it. But, again, it’s about control much more than it is about labels.

I struggle to call this “B.S.” because I think the employer sincerely is trying to limit its risk. But if IRS ever investigated the classification, they will be looking at the control the contractor has over you and not whether they put an SSN or an EIN on their paperwork. As such, I wouldn’t call the contractor’s EIN requirement B.S. — but rather an imperfect application of a common tax principal.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny. Either he or one of’s other experts will answer you.

If My Husband Owes Taxes, Do They Come After Me?

Question: I have a home and other assets. I recently married and then found out my husband had not filed taxes for 10 years — and owes the IRS $38,000! Is my home, bank account, and assets subject to a lien? Are they at risk? Am I responsible for this debt?

— Debra in Texas

If My Husband Owes Taxes, Do They Come After Me

If my husband owes taxes, do they come after me? A reader doesn’t care about her husband’s old flames, just his old bills. Three of the happiest words in the English language are, I love you. Three of the absolute scariest words, Internal Revenue Service.

When you combine them it can get really confusing. Some of the trickiest financial questions I’ve ever heard were from spouses stuck in tax disputes. Tax problems are complicated enough when one person is involved. When it’s two spouses filling jointly it’s the difference between walking a tightrope and walking a tightrope while giving someone a piggyback ride, and don’t get me started on community property estates.

For that you need a read my much longer answer to Deborah on and check out our section titled, “If my spouse owes back taxes and I liable?”. This is a good time to remind couples who aren’t yet married, but are planning to sit down together and make a list of your finances. I’m talking the good, I’m talking the bad, and I’m talking the ugly your assets and your debts.

I’ve always said the best way to deal with the IRS is to never get on their radar. If you want advice for how to budget so you don’t get in trouble consult before you say I do.

Howard Dvorkin answers…

Even though I’ve been a CPA and financial counselor for more than two decades, I prefer to consult tax experts on questions like these — just to confirm I’m right.

In this instance, my instincts proved correct, says Don Markland, chief revenue officer for the Tax Defense Network. partners with Markland’s firm because of its experience and adherence to’s Code of Ethics.

Says Markland…

The easy answer is yes, Debra is liable. Texas is a community property state, and debt created during the marriage is owed by both spouses.

Of course, when it comes to taxes, nothing is easy. So let’s break it down.

What are community property states?

If you live in one of these states — and there are only nine of them —  all the property and debt acquired during a marriage belongs to both spouses. Texas is one such state. (The others are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Washington, and Wisconsin.)

“Income or assets created during the marriage are subject to collections,” Markland says. “Your income and bank accounts are at risk.”

What about before the marriage?

“Generally, premarital assets are not community property and can be protected,” Markland says. Please note the word generally. That’s because other factors come into play. Here’s just one, Debra: Are you filing jointly or single?

“This will greatly influence your returns,” Markland says.

What to do next

First, you should read the report that touches on this very topic. It’s called If My Spouse Owes Back Taxes Am I Liable?

While that report is, in my humble opinion, the best and cleanest explanation I’ve yet seen, it’s still not a pleasurable read. That leads me to warn you…

Because tax issues are complex, and because you live in a community property state, you need to consult an expert. Whenever I tell people this, they usually express fear: How much will this cost me?I tell them: You will indeed pay a fee, but if you consult a reputable expert, it’s almost always less than it would cost you to try it on your own — and always less than the cost of ignoring the problem until it catches up with you.

Concludes Markland: “We’d love to talk to Debra and walk her through this. It can be complicated, but we have experts who handle this all of the time.”

I can vouch for that.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.


What Is Tax Fraud? And Should I Be Worried About It?

Question: My husband does our taxes every year, and when I tell him I’ve read lots of stories about tax fraud, he tells me not to worry.

He says it’s just a bunch of companies trying to scare us into buying protection services. He says all those identity theft commercials on TV, where they tell you it’s the most horrible problem ever – and then they want $20 a month to solve it.

I don’t know what to think. I don’t even know what tax fraud is, exactly. What do you think?

— Cindy in Oregon

Howard Dvorkin answers…

Before I tell you what I think, Cindy, let me tell you what I know: Identity theft and tax fraud are very real and very big problems.

Your question is about tax fraud, which can be a form of identity theft depending on how it’s done. First, let me impress upon you and your husband: Identity theft is the most pervasive crime in this country. Tell me another crime that affects more than 12 million Americans a year, according to statistics compiled by

Now let’s address your husband’s excuse for not taking tax fraud seriously. Yes, there are companies out there that advertise their services to protect you from identity theft. Thankfully, most are reputable, from LifeLock to one that partners with.

I don’t agree with “scare tactics” in advertising, precisely because they make people like your husband skeptical or numb to the problem. However, it’s a big mistake to ignore tax fraud. Let’s discuss why…

What is tax identity theft?

As wrote earlier this year, “Tax identity theft is committed when a criminal files a tax return in your name, with the hopes of stealing your refund.” There are numerous ways they do this, and they’re always changing and evolving.

In fact, the IRS just recently warned tax preparers “to step up security and beware of phishing emails that can secretly download malicious software that can help cybercriminals steal client data.”

How does this new scam work? It’s brazen, says the IRS…

In a new twist, the fraudulent returns in a few cases used the taxpayers’ real bank accounts for the deposit. A woman posing as a debt collection agency official then contacted the taxpayers to say a refund was deposited in error and asked the taxpayers to forward the money to her.

That’s right, the criminals actually steal your identity from your tax preparer, file a fraudulent return, and put the refund in your own account. Then they pose as IRS agents or police and insist the deposit is an error – and order you to return it.

As Forbes describes it, this scam works because, “Unlike previous variations on the scams, there is ‘proof’ that the call from the alleged IRS representative is for real: The taxpayer typically does have a bogus tax refund in his or her bank account.”

What you can do to protect yourself

There are three tactics that can help you avoid this kind of tax fraud. First, file your taxes soon as you can. You basically want to beat the bad guys to the punch. They can’t file for you if you’ve already done it.

Second, the IRS offers a refund tracking service. Check it out. It’s free. Third, you can e-file your taxes, which requires a PIN.

Whatever you do, Cindy, tell your husband: Doing nothing is dangerous.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

How to Settle Tax Debt

Learn how to settle tax debt with the IRS using an Offer in Compromise

Can you settle IRS tax debt?

Yes. It is possible to settle tax debt for less than you owe with the IRS. You use a solution known as an Offer in Compromise or OIC. This is the solution you may hear advertised that boasts you can “settle tax debt for pennies on the dollar.”

If you tax burden outweighs what you can afford to pay, learn how to settle tax debt

It’s worth noting, however, that the IRS doesn’t just hand OICs out to anyone who requests one. The IRS must have a reasonable expectation that they cannot collect the full amount owed. You basically need to prove that the reduced settlement amount is the maximum amount they can expect to receive. can connect you with a certified tax specialist that can help you make a plan to eliminate your tax debt!

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How to settle tax debt step by step

  1. First you apply for an Offer in Compromise (OIC) using Form 656.
  2. You must pay a $186 application fee to apply.
  3. You must also provide a full financial disclosure that details all your income, expenditures, assets and equity.
  4. For wage earners and self-employed workers, you then must complete Form 433-A the “Collection Information Statement”; you also will need to submit supporting documentation.
  5. The IRS reviews your application package. If it’s accepted, settlement negotiation begins.
  6. You and the IRS come to an agreement of what percentage of your back taxes you can afford to pay back.
  7. Then once accepted, you have 2 years to repay that amount.

You must continue to file taxes for each new year. If you receive a refund from filing within that two-year period, the IRS will apply it towards your settlement.

Are you eligible to settle your tax debt?

Your tax filings must be currentYou have an open bankruptcy proceeding
You’ve received at least one bill about the tax debt you want to include in the offerThe IRS determines you have the means to pay the full amount with an Installment agreement (IA)
You must make all required tax payments for the current yearYou have equity in assets that could be used to pay off any back taxes in-full

If your tax returns are not current and you aren’t current with the payments for the current year, the IRS simply returns your offer.

6 Considerations as You Settle Tax Debt

#1: Penalties and interest continue to accrue

Very few things stop IRS penalty accrual, including filing an Offer in Compromise. While the IRS considers your offer, penalties and penalty interest will continue to apply.  Once you reach a settlement, this stops being an issue. You pay the amount agreed, and you’re free and clear.

#2: Bankruptcy blocks tax debt settlement

Tax debt is generally resolved with the rest of your debts during a personal bankruptcy filing. So, you can’t have an open bankruptcy case and file for tax debt settlement at the same time. If you already filed for bankruptcy, the courts should resolve the issues with your tax debt during the bankruptcy proceedings.

#3: There is a possibility to get the application fee back

If you’re struggling to pay your taxes because of extreme financial hardship, that $186 application fee may be hard to manage. The good news is that if the IRS determines severe financial hardship, then they may refund the fee. They will let you know after you offer is processed whether you are eligible to request a refund.

#4: Form 433-A helps you determine an appropriate offer

You can’t just offer the IRS some random amount and expect that they’ll accept it. You also don’t have to just guess at what’s the right amount. Settlement negotiation always starts with the amount determined through Form 433-A; for the record, there is also Form 433-B if you’re applying for settlement as a business.

#5: You can make the settlement in payments

You won’t be required to pay everything back at once. You can choose the OIC Periodic Payment option. This allows you to make the settlement in installments. You basically pay the IRS each month with fixed payments. You can pay more than the minimum required amount if you have extra funds. However, you must pay the full amount agreed within two years from settlement acceptance.

#6: Defaulting on an OIC is extremely bad

If you don’t pay the amount agreed, the IRS will not be kind. You will be liable for the original tax debt, minus any payments you made. They’ll also reapply all penalties and accrued interest charges. What’s more, they will be much less willing to work with you; a second settlement agreement is highly unlikely.

How to settle tax debt yourself

You have two options to file an Offer in Compromise. You can work with a tax debt resolution service or you can try to file on your own. If you want to settle tax debt yourself, simply download the IRS Form 656 Booklet. In includes Form 656 and Form 433-A form that you need to fill out for your financial disclosure. Complete the forms and send them in to file on your own.

A word of warning about settling tax debt on your own

Form 433-A provides a full financial disclosure, so it’s not exactly a short form. In fact, it’s a 10-section form. If you think filing your taxes is complicated, this is significantly more complex. And if the form is not filled out correctly and completely, the IRS will reject your OIC application.

As we mentioned above, OICs are not readily accepted by the IRS. If there’s any potential that you can pay off the full amount, they won’t accept your OIC. They will also reject you if you have any assets you can liquidate to pay off the debt.

So, proving that you qualify for an Offer in Compromise is not an easy task. Unless you know what you’re doing, we recommend working with a resolution team! It will increase your chances for a successful outcome and an accepted OIC.


Can The IRS Garnish My Wages Till I’m Broke?

Question: I just received a letter stating my student loan that has been in default is to be offset. I am working. I am also in arrears for child support, which is garnished. I barely make $11,000 a year and I have $300 garnished each month for my arrears.

My question is: Can the government garnish my wages at the same time as my arrears are being garnished? Or do they wait until my arrears are paid off? If they do that, I won’t have anything left to live on!

— Angie in Texas

Steve Rhode answers…

You are living through a tremendously stressful situation, Angie. I wish I could wave a wand and make that pressure vanish. What I can offer you is good information and a plan forward.

1. Look into an offset

An offset is typically a tax refund intercept, unless you’re also getting federal benefits like Social Security. The tax refund intercept is easy to deal with — just don’t get a tax refund. You should adjust your withholding, if any, to get more money in your pocket each month and not in a refund check to be intercepted.

2. Payment plan

Now that’s a short-term solution. For more of a long-term solution on the federal loans, you can get into a $0 per month payment plan that will keep you out of default. In fact, I just recently answered a reader question that dealt with this.

I’m not an attorney. You’d need to speak to an attorney licensed in Texas for specific legal advice, but it appears in Texas you can have up to a wage garnishment that’s up to 25 percent of your disposable income — but not more than 30 times the minimum wage.

If you did get a federal student loan wage garnishment, it would come in the form of a letter and be called an “Administrative Wage Garnishment.” Open it. The letter will instruct you how to appeal the garnishment and most likely get it suspended.

3. Modification

Texas will allow you to modify your mandatory child support garnishment if you can demonstrate the garnishment doesn’t allow you sufficient income to live on. To get the garnishment modified, you’d need to talk to the court or a licensed attorney in Texas.

Thank you for letting me help you find a way forward, Angie.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

How Can I Not Freak Out About The IRS And My Back Taxes?

Question: I just got a letter from the IRS saying me and my wife owe $12,000 in back taxes — from three years ago! That’s when we started our business and had my wife’s idiot cousin do our accounting and taxes.  He only did it for a year because he got arrested for a DUI.

So here are my questions:

  • Why did this take three years?
  • What do I do now? Our business is gone and we don’t have six large lying around.
  • Since this was the idiot cousin’s fault, can we send the IRS after him?
  • Do we need a lawyer? Is the IRS going to lien our house?

Help me out here, I’m freaking out. 

— Stan in Maryland

Howard Dvorkin CPA answers…

Let’s start at the end and work our way back to the beginning. First, don’t freak out.

When you think of the IRS, you don’t often conjure up images of helpful people. However, if you go to the IRS web page, What You Need to Know if You Get a Letter in the Mail from the IRS, here’s what it says under the very first item…

1. Don’t panic.

Believe it or not, the IRS isn’t out to get you. It just wants to get paid. So it will actually work with you. The horror stories of the IRS seizing houses to settle back taxes? Those usually neglect one key fact, summed up in this explanation of federal tax liens

Usually, the IRS will only place a tax lien when no effort has been made to resolve a tax debt, despite the numerous letters and notices they have sent.

Even then, you’ll receive a warning that a lien is coming, and you’ll have 30 days to resolve the situation. Since you recently received this letter, you’re in no danger of this nuclear option right now.

Thankfully, “resolving the situation” doesn’t have to mean paying your entire balance on a moment’s notice. As you say, Stan, you don’t have $6,000 laying around. Many people don’t, and the IRS knows that.

That’s why the IRS offers installment agreements. Basically, you pay back the IRS monthly, just like you do a mortgage or credit card balance. Of course, you’ll pay penalties and interest on those installments, so the more you can afford to pay, the less you’ll owe in the end.

As for hiring an attorney, that depends on the complexities of your situation. If you seek what’s known as tax debt consolidation or an offer in compromise, the paperwork can be daunting. However, I’d follow the directions on the IRS letter first and see if you can work out a payment plan that doesn’t kill you.

Finally, about your idiot cousin.

The IRS holds you, and only you, responsible for your tax return. That’s why you sign it — because you’re supposed to review it. In the future, stick with professionals who have a long track record and excellent reviews. Idiot cousins may seem a cheaper alternative, but as you’ve learned, they can cost you later.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

How Friendly Is The IRS? Will They Work With Us?

Question: My husband and I needed to withdraw our 401(K) to basically live off of due to unforeseen medical expenses. With that being said, we have started a payment plan for 2015 taxes, which we can barely make, and will have to make payments for the 2016 returns.

My husband is 66 and I am 55, and we own a home, but still have a mortgage. My husband works part-time and takes his Social Security. I am working full-time.

Our question is, if we contact the IRS to ask to lower our monthly payments, will they work with us? We understand we need to pay our taxes, and are not trying to get out of that responsibility. However, we need to lower the payments.

Any suggestion/ideas would be helpful.

— Karen in Massachusetts

Howard Dvorkin CPA answers…

Besides “complete thermonuclear annihilation,” the three scariest words in the English language for most people are, “Internal Revenue Service.” They shouldn’t be.

The IRS is surprisingly easy to work with. Please note I didn’t say enjoyable. However, if you’re having trouble paying your taxes, the IRS doesn’t want to bleed you dry, and it can’t throw you in debtors’ prison (which was outlawed in this country hundreds of years ago).

The worst the IRS can do also involves three words, and they sound innocuous: “federal tax lien.” That means the IRS lays claim “to everything that you own and anything that you may own in the future while the lien is still in place.” However, as you’ll read if you click that link…

Usually, the IRS will only place a tax lien when no effort has been made to resolve a tax debt, despite the numerous letters and notices they have sent.

So if you work with the IRS, it will work with you. Don’t wait, because every month brings more penalties and interest. You can also seek a deal. It’s called an offer in compromise, and it allows you to pay less than you owe.

If that sounds too good to be true, it’s not — although it does come with many strings attached. Click the link to read more, and realize the IRS accepts only a fraction of these offers. Still, it’s worth exploring.

One last piece of advice: If you’re struggling to pay your taxes, that’s not only a problem but a symptom of larger debt issues. I strongly urge you to take advantage of a free debt analysis from a certified credit counselor. You can do that simply by calling the phone number.

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.