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Ok, to sum some things up for OP and other interested parties.

Your accountant needs to be fired. Any accountant that tells you it is ok to postpone a return that you know has a balance due should be fired. Interest is building every single day, so it is costing you money to wait and it is costing him nothing. Keep that in mind.

Doing income taxes with software is certainly a good way to go. But keep in mind that the software is NOT a substitute for knowledge or a good tax preparer. Simply stated, if you put junk in, you will get junk out. Remember those Turbotax commercials from last tax season? They said they guarantee the "computations". Ask yourself when the last time your computer got your arithmatic wrong. Math is not the issue, tax law is. I used to work at H&R Block and I used to teach their tax course, which is open to anyone. It costs between $150 and $200, but the knowledge you'll gain is priceless. Don't like Block? Fine, find another tax course. Most prep services offer one, but they vary greatly in quality. If you take it and still want to use a tax pro or software, great, but now you'll know a little about what he is talking about and what the software is asking you. Or, you can always spend hours reading the Pubs (they are not that bad when you know the basics).

I now work at a tax representation firm, and I am an enrolled agent. I talk to various departments of the IRS everyday, and believe it or not, most of the people I talk to are very nice. I also see the worst of the worst of clients who have the IRS hot on their trail. I have a client that has a wage levy, so he took an unpaid leave of absence and got another job four hours away. He thought he could work there a while before the IRS caught up with him. (The newest wage levy arrived on day four.) Then he called us.

Installment agreements are great, but you have to use them the way they are intended. It is not a tool to get rid of a levy for a while, as so many people believe. It is also not possible to get an installment agreement that will cost you "$5 a month for the rest of my life." Wish I had money for everytime I heard that. There are also requirements that must be met along the way, including being current on all tax returns and tax deposits. That might sound minor, but I prepare returns as well, and I do many returns for people who haven't filed for more than ten years. I have seen a single year $10,000 balance due turn into $250,000 in a matter of years. Think it can't happen? Think again.

The Tax Advocate service can be very useful, just as notatwork said. I deal with them all of the time, and they have helped with client issues more times than I can count. But remember that they are still part of the IRS, no matter how "independent" they say they are. Take that for what it is worth.

Here is another good, stead-fast rule. NEVER go to an audit, if you can avoid it. I don't mean that going to an audit itself bad, what I mean is the taxpayer should avoid going. Ever. Period. Paid representation is best. They have the tax knowledge, they won't volunteer more information than the IRS asks, and they know what the boundaries are. Any qualified enrolled agent, CPA, or attorney can go to an audit for you with a minimum of paperwork. Do not go. Ever. If the person who prepares your return (whether that is YOU or an unenrolled preparer) is not one of the above, they should not be at an audit. An unenrolled preparer is worthless at an audit, and they are only acting as a witness. Not a representative. And they have to spill everything you said during the tax prep - there is NO privacy or privledge. Don't bring your friends or family either. If the person you want to go to an audit for you doesn't know what a CIRCULAR 230 is, RUN away and find someone else.

Finally, it is possible to work out a deal with the IRS for less than your total balance due. But it is NOT as easy as they make it sound on tv or at your local bar. I do those too, and the rules are tight and they continue to tighten. Don't believe anyone who says there is a "simple way" to get rid of your tax bill. There is one simple way - pay it. Other than that, there are hurdles to jump.

On a personal note, sometimes it is difficult for me to sympathize with the taxpayers. Many of the people I help got behind and never knew how to catch up. I understand that. What I am talking about are the people who simply flaunt their lawlessness. I have had people tell me many times that they are going to leave the country, or take some other measure to avoid the IRS. Well have fun overseas, your tax bill with the IRS will never run out. It'll be here waiting for you. In the mean time, I, and many other law-abiding citizens, will be filing our returns. Getting current with the IRS is much easier and more painless, and you will feel much better about yourself.
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