3. Ignore letters and collection notices from the IRS: A notice from the IRS is the first step in a legal procedure to secure the right to seize your assets. An effective tax team can halt the collection process until a permanent solution can be found. "The most costly mistake you can make is to ignore the IRS," says Kassel.
4. Fail to contest a tax levy: The IRS has become more aggressive in wage garnishment and seizure of bank accounts, IRAs and even residences. These can be legally contested, or even better, prevented. "If you lock up a person's bank account, they can't do business, they can't pay their employees and they are forced to shut down," says Rome. "That's not in anyone's interest."
5. Fail to file a return: It is a crime if you fail to file a tax return when tax is owed. It is not a crime, however, to file your taxes and not pay them.
6. Fail to pay payroll taxes: The IRS views very seriously employers who fail to file or pay employee withholding taxes. It's not just the tax money that the employer pocketed; the IRS has in turn already paid returns on that money to employees. Penalties and interest in these cases are very steep, and there is no relief, not even in bankruptcy.
7. Pay your full bill: Taxpayers who pay their tax liability without demanding relief from penalties and interest may overpay by thousands of dollars. You may qualify to have these charges reduced, removed, or even refunded. Rome says his group of accountants, lawyers and enrolled agents use the IRS guidelines for pre-settlement planning to get the client's disposable income as low as possible in order to obtain a settlement the taxpayer can uphold.
8. File bankruptcy: Bankruptcy won't apply to any tax liability owed for the past three years, and may even extend collection time and add penalties and interest. But if your back taxes are more than three years old, you may want to consider bankruptcy.
9. Allow the IRS to file your tax return for you: Yes, it is an option, through a process called Substitute for Return, or SFR. Is it a good option? Hardly. The IRS will disallow any deductions and tax you at the highest possible rate, says Rome.
10. Fail to remove a federal tax lien from your record: When the IRS does accept an offer in compromise, it is generally required to remove all tax liens within 30 days. Make sure that happens.
Look out for late-night ads
Kassel also cautions against succumbing to the high-pressure ads on late-night television and the Internet that promise an instant end to your tax troubles."A huge number, I would say at least half of the companies that advertise on the Internet, are not actually looking to represent you, they just collect your information and sell it as leads. When you do that, God knows who you're going to be contacted by," he says.
Believe their guarantees and promises at your own risk, says Kassel.
"You're already in a vulnerable situation, and people know that, so it's very easy to sit down with you or talk with you on the telephone and say, 'Oh, we're going to get all of the penalties wiped out. We're going to get an offer accepted for a couple of pennies on the dollar.'
"Well, that does happen in some cases, but in the vast majority, that's not going to be the outcome. So now you've put out more money, there has still been no contact with the IRS at all, and all you are is deeper in the hole and further along in the process. It's a never-ending cycle."
Jay MacDonald is a contributing editor based in Mississippi.