The words “IRS” and “tax debt” can strike fear into the hearts of many, but what if you had an expert guide to help you navigate the process? Whether you’re facing mounting tax debt, undergoing an audit, or just want to stay on the IRS’ good side, this episode is for you. The Agent of Wealth host Marc Bautis is joined by Stephen A. Weisberg, Founder and Lead Attorney of The W Tax Group, who has helped countless individuals and businesses resolve their tax challenges.
In this episode, you will learn:
- What triggers tax debt and how audits can result in unexpected liabilities.
- The difference between CPAs and tax attorneys when it comes to IRS representation.
- Proactive steps you can take to prevent tax problems before they arise.
- How IRS penalties and interest rates work—and why failing to file can be costly.
- And more!
Resources:
Weisberg.tax | wtaxattorney.com/stephen-weisberg/ | Email: S.Weisberg@weisberg.tax | Tel: 248-971-0885 | Stephen A. Weisberg on LinkedIn | Bautis Financial: 8 Hillside Ave, Suite LL1 Montclair, New Jersey 07042 (862) 205-5000 | Schedule an Introductory Call
Disclosure: The transcript below has been edited for clarity and content. It is not a direct transcription of the full episode, which can be listened to above.
Welcome back to The Agent of Wealth Podcast, this is your host Marc Bautis. Today, I’m joined by a special guest, Stephen A. Weisberg. Stephen is the founder and lead attorney of The W Tax Group, bringing over a decade of experience helping individuals and businesses resolve tax debt, audits, and other IRS disputes.
Stephen’s client-first approach starts with a Free Tax Debt Analysis to provide absolute transparency and customized solutions designed to meet the unique needs of each and every client.
His proven track record of delivering favorable results has made him a highly sought-after tax defense attorney nationwide.
Stephen, welcome to the show.
Thanks, Marc. Thanks for having me.
Can you start by explaining what tax debt is and how it typically arises for individuals and businesses?
Sure. Simply put, tax debt is when you owe money to the IRS. However, that can arise in a few different ways, and there are different types of tax issues that I work with. I help a lot of individuals, especially those who are self-employed, whether they have a single-member LLC or own a business with multiple employees.
For individuals and self-employed people, tax debt arises when they either file a tax return or fail to file one, but ultimately owe money to the IRS. A common issue for self-employed individuals is that taxes aren’t automatically deducted from their paycheck, so they either forget or neglect to make quarterly payments. Then, at the end of the year, they realize they owe money and think, Oops, I spent it all. Now I need help.
How soon does the IRS typically notify someone that they owe money? Do they know immediately, or does it take time for the IRS to catch up?
It depends on the situation. If you file a return and owe a balance, you’ll receive a notice from the IRS within a few weeks—maybe a month.
Some people think, Well, I just won’t file a return. But that actually puts them in an even worse position. The IRS will eventually come after them by filing a Substitute for Return on their behalf. This return won’t include any deductions or credits they may be entitled to, meaning their tax liability will likely be inflated. Plus, on top of the amount owed, they’ll also face a Failure to File penalty along with a Failure to Pay penalty.
So, the bottom line is: even if you can’t pay your full tax bill, it’s always better to file your return. If you can at least make a partial payment, that’s better than not filing at all.
Is the most common scenario you see where someone should have been making quarterly estimated tax payments but didn’t, and then at the end of the year, they just don’t have the money to pay?
Yes, a lot of my clients fall into that category. If you’re an employee, your taxes are automatically withheld from each paycheck—it’s structured, and you don’t have to think about it. But for self-employed individuals, it’s a different story.
If they don’t discipline themselves to make quarterly tax payments to the IRS, they often just say, I’ll figure it out later.Then, at the end of the year, they realize they owe a substantial amount but don’t have the cash to cover it. That’s when it becomes a problem.
From a financial planning perspective, I always recommend automating savings—whether it’s for a 401(k) or other financial goals. I imagine that self-employed individuals should also automate their tax payments to ensure they don’t run into this issue.
Let’s walk through a scenario. If someone comes to you and says, I got a letter from the IRS saying I owe money, but I don’t know what to do next, or I don’t have the money to pay, how do you get involved? What happens next?
Great question. You may have heard those radio ads that claim, We’ll resolve your tax debt for just 10% of what you owe!What usually happens is someone calls these companies, and they’re told, Yes, we can settle your tax debt for pennies on the dollar—just pay us $10,000 and we’ll take care of it.
Then, they file what’s called an Offer in Compromise—which is essentially an attempt to settle tax debt for less than the full amount owed. But in many cases, these offers get denied. And once that happens, the client is out $10,000, still owes the IRS, and now feels completely stuck.
I operate very differently. Anyone who tells you they can settle your tax debt without first reviewing your situation is lying, plain and simple.
Here’s how I do things: I start with a Free Tax Debt Analysis. For a small initial fee—typically around $500—that amount goes toward the ultimate resolution plan.
First, I conduct a full analysis of your tax situation. I determine how much you owe, how much of it is penalties and interest, and whether you have any unfiled returns. You must have all your tax returns filed before we can work on a resolution.
Then, I review your financial situation. Based on all of this information, I make an informed recommendation. I’ll say, Here’s how much you owe, here’s what needs to happen—whether that’s filing missing returns or setting up a payment plan—and here’s what I believe I can do to help you resolve the issue.
I lay everything out clearly upfront. Unlike those shady companies that just take your money and hope for the best, I ensure you understand exactly where your money is going and how we’re going to fix the problem.
I know you mentioned the Offer in Compromise. Can we cover that a little more? You mentioned that some people get denied—are there instances where it is accepted and actually works as a resolution?
Yes. Everyone loves to hear about the Offer in Compromise. It’s certainly the best option—if you qualify for it. The problem is that not everyone qualifies. In fact, I’d say most people don’t. But when it works, it’s an excellent resolution.
The key is qualification. If someone tells you that you qualify without ever reviewing your case, they’re making things up. It sounds too good to be true, and for many, it is—but not because it’s fake. It’s just that not everyone meets the requirements. If you do qualify, you may be able to settle a large tax debt for a fraction of what you owe. For example, you might settle a $100,000 debt for just $500. That’s real. But whether it works depends on several factors: how much you owe, the years involved, whether your returns are filed, and most importantly, your financial situation.
So how does it work? Are you just making an offer, or is there a formal process to apply? Does the IRS review it and then decide to approve, deny, or modify it?
Exactly. There’s a formal process. You have to prepare and submit specific forms—Form 656 and Form 433-A (OIC). The process itself is formulaic, meaning the IRS uses a set formula to determine eligibility. But within that formula, the details are highly complex.
You need to submit accurate financial data and use the Internal Revenue Manual (IRM), which guides the IRS’s decision-making. After you submit the forms, you enter a negotiation with what’s called an “offer specialist.” If your offer is denied at that stage, you can appeal, and sometimes it gets resolved in appeals. But it’s a detailed, multi-step process that requires careful preparation.
When you do a tax debt analysis, do you typically have a good sense of whether someone will qualify?
Yes, absolutely. Offer in Compromise approval rates vary year by year, but generally, the IRS accepts about 40-45% of submitted offers. However, my success rate is around 95%—and that’s because I don’t submit offers that I know won’t qualify.
The problem is that many people submit Offers in Compromise without meeting the requirements. Those get denied, and that’s why the overall success rate is lower. But when I review a case, I analyze the financials and the tax situation upfront. If I submit an offer, it’s because I believe there’s a strong chance it will be approved.
Okay, so let’s say someone doesn’t qualify for an Offer in Compromise. What are some other ways to resolve tax debt?
That’s a great question. Offer in Compromise is often seen as the “holy grail,” but it’s not the only solution. There are several other options.
One of the most common is an installment agreement, which is essentially a monthly payment plan with the IRS. It sounds straightforward—and technically, it is—but there are different types of installment agreements, and the details matter.
For example, there’s something called a “partial pay installment agreement.” This allows you to make monthly payments, but you never actually pay off the full tax debt. That’s because the IRS only has 10 years from the time a tax debt is assessed to collect on it.
Let’s say you owe $100,000 but are only able to pay $100 per month. By the time the statute of limitations expires, you may have only paid $10,000. When the 10-year period runs out, the remaining balance—$90,000—gets wiped out.
I’ve had more success with partial pay installment agreements than Offers in Compromise. They still require qualification, but the process is less scrutinized, and there’s more flexibility. It’s a very effective strategy for reducing tax debt.
It sounds similar to an Offer in Compromise in that the taxpayer ends up paying less than they owe. But why would the IRS allow that? Wouldn’t they realize they’ll never recover the full amount?
It all comes down to financials. The IRS looks at your assets, income, and expenses. If they determine that $100 per month is all you can afford, they’ll accept that—because getting something is better than getting nothing.
However, the IRS does periodically review these agreements. Let’s say you enter a partial pay installment agreement and five years later, your income increases significantly. The IRS may reassess your situation and decide you can afford to pay more.
Can the IRS do the same thing with an Offer in Compromise? Can they come back and reassess it?
No, the Offer in Compromise is different—and that’s why it’s considered the best option when available. If your offer is accepted, and you settle your tax debt for $500, you must pay that amount within five months. After that, your tax debt is gone.
However, there is one important condition: You must stay in compliance for the next five years. That means filing your returns on time and making sure you don’t owe additional taxes. If you fail to comply—say, by not filing on time or by owing taxes in a future year—the IRS can revoke the Offer in Compromise, and your full original tax debt will come back.
That makes sense. Now, like with most things, someone could choose to handle this themselves or hire a professional like you. What are some of the mistakes people make when trying to do it on their own?
Great question. People do try to handle this themselves, and on the surface, it may seem straightforward. But the reality is that dealing with the IRS is incredibly complex.
The IRS follows the Internal Revenue Manual (IRM), which dictates how they handle tax debt cases. This manual is dense, bureaucratic, and full of rules that most taxpayers don’t understand. The IRS has immense power, and unfortunately, they do not have the taxpayer’s best interests in mind.
Many people don’t realize that the IRS can—and will—trample over their rights if they don’t have proper representation. A taxpayer has certain rights regarding how they are treated and what options are available to them. But if you don’t know those rights, the IRS won’t exactly go out of its way to inform you.
At the end of the day, the IRS is the largest and most powerful collection agency in the world. If you don’t have a professional advocating for you, you’re at their mercy.
Now, let’s take a step back and discuss what can lead to tax debt. We talked about self-employed individuals who simply don’t pay their taxes, but let’s examine this from the perspective of an audit, which can also result in taxes owed. Do you often see cases where a business or an individual is audited, and the outcome is a significant tax bill they don’t have the cash to cover? Does that create major issues?
Yes, audits do happen. However, they’ve actually been occurring less frequently than in the past. While that may seem like good news for some, it’s not necessarily beneficial to society if people are cheating on their taxes.
That said, the IRS still conducts many correspondence audits. This is when they send a notice stating, “We believe you owe X amount, but you reported Y amount.” You then have to respond, providing evidence to support your reported amount. These audits hinge on tax law, administrative law, and ensuring all deductions and credits are properly accounted for. Sometimes, the IRS’s calculations are simply incorrect. If you don’t have proper representation, it can be difficult to defend yourself and challenge their claims.
You mentioned representation, and I know you’re an attorney. When people receive a letter from the IRS, their first instinct is usually to contact their accountant or CPA. From both the audit and tax debt perspectives, what’s the difference between what a CPA can do versus what someone like yourself, an attorney, can handle?
That’s a great question. A CPA can certainly help, but the reality is that many CPAs refer cases like these to me because they’re not well-versed in this type of work. My niche and expertise are solely in tax debt and tax controversies. That’s all I do—I don’t handle bankruptcy or divorce, just tax debt.
CPAs and tax preparers are excellent at preparing returns, but they’re not always equipped to deal with the IRS when it comes to defending a taxpayer’s rights. In many cases, a CPA will reach out to me and say, “Stephen, I have a client who owes $50,000, and I’m not sure how to help them. Can you take this on?” And I do.
Of course, the CPA remains the client’s go-to for tax preparation and accounting, while I focus on resolving their tax debt and handling administrative matters with the IRS. Some CPAs attempt to handle these cases themselves, but without the right expertise, it can lead to poor results. Unfortunately, in these cases, the taxpayer may suffer due to inadequate representation.
We’ve been discussing these tax issues from the perspective of what happens once someone already has a problem. But is there anything people can do proactively to avoid tax issues in the first place? You mentioned making quarterly estimated payments—are there any other strategies to prevent tax trouble?
Absolutely. Automation is key. If you can set up your quarterly tax payments to be sent automatically, it removes the temptation to delay and ensures you stay on top of your obligations.
Beyond that, as soon as you realize you’re going to owe taxes for the year, you need to act immediately. Many people wait until the last minute, and by that time, their bank accounts may be levied, or they’re receiving final notices of intent to levy from the IRS. When clients come to me in that situation, our options are much more limited.
Instead, as soon as you know you won’t be able to pay your full tax bill, seek help. Whether it’s from me, a CPA, or another tax professional, addressing the issue early gives you more leverage. You can take your time, explore different solutions, and even make partial payments to mitigate penalties. It’s far better to approach the IRS proactively than to wait until they start taking action against you.
When you say taking action, are you referring to sending notices, or do some people ignore those notices until the IRS takes more drastic steps?
Also, I’ve seen cases where people simply don’t file their returns. If someone hasn’t filed in years, is it in their best interest to come forward voluntarily? Do you ever approach the IRS preemptively and say, “Hey, my client hasn’t filed in three years, and we estimate they owe X amount?”
Yes, that happens often. If someone doesn’t file their return, the IRS will eventually file what’s called a substitute for return (SFR) on their behalf. The IRS knows how much income was reported to them via W-2s and 1099s, but they won’t factor in any deductions or credits.
For example, if a business owner earned $100,000 in revenue but had $75,000 in legitimate business expenses, the IRS won’t account for those deductions when filing an SFR. Instead, they’ll assess tax on the full $100,000, which can result in an inflated tax bill.
To your second point—yes, it’s always better to be proactive. If someone hasn’t filed, even if the IRS hasn’t yet issued an SFR, they should file voluntarily. The good news is that the IRS typically only requires the last seven years of tax returns, even if someone hasn’t filed in decades. I’ve had clients who hadn’t filed in 20 years, but we only needed to submit returns for the most recent seven years to get them back into compliance.
By voluntarily filing and working toward a resolution, you can avoid severe consequences like bank levies and wage garnishments. The sooner you act, the better.
How do interest and penalties work? And since interest rates have gone up recently, has the IRS also increased the interest they charge on tax debt?
Yes, the interest rate the IRS charges is tied to prevailing market rates, so it has gone up in recent years. That said, interest isn’t the biggest issue—it’s relatively reasonable compared to other types of debt.
The real problem is the penalties. There are two major penalties:
- Failure-to-file penalty – This applies if you don’t file your tax return on time.
- Failure-to-pay penalty – This applies if you don’t pay the taxes owed.
Each of these penalties can reach up to 25% of the total amount due. If both penalties apply, you could end up owing an additional 50% on top of your original tax bill. That’s why, even if you can’t afford to pay your taxes in full, you should at least file your return. Filing stops the failure-to-file penalty from accruing, and making partial payments can help reduce the failure-to-pay penalty. Ignoring both will result in penalties compounding quickly, making the situation much worse.
That makes a lot of sense. Alright, Stephen, that’s all the questions I have for you today. I really appreciate you joining me on this episode—you’ve shared a ton of valuable insights.
Before we go, how can our listeners get in touch with you or learn more about your services?
I’m very active on LinkedIn, where I share a lot of educational content and newsletters. You can find me there under Stephen A. Weisberg.
For direct contact, my phone number is (248) 971-0885—that’s my direct line, no intermediaries.
I’m the founder and lead attorney of The W Tax Group, and you can visit our website at wtaxattorney.com for more information.
But again, I’d start with LinkedIn—Stephen A. Weisberg—or give me a call at (248) 971-0885.
Great. We’ll link to all that in the resources section of the show notes. Thanks again, Stephen. And thank you to everyone who tuned into today’s episode. Don’t forget to follow The Agent of Wealth on the platform you listen from and leave us a review of the show. We are currently accepting new clients, if you’d like to schedule a 1-on-1 consultation with our advisors, please do so below.
Bautis Financial LLC is a registered investment advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.