When you face a large tax liability, you can give the IRS an Offer in Compromise, or request a Penalty Abatement. But your best defense is to minimize your tax liability at the front end.

“With most of our clients, we can show them tax deductions and tax saving strategies that will reduce the amount they owe immediately and up front,” says Marc Jernigan, one of Tax Matters Solutions CPA’s.

Emmeline came into our office, frantic with worry. She and her husband, Joe, owned a trucking company. Emmeline managed the office, and did everything. Well, almost. In 2002, when they didn’t have the money to pay payroll taxes, and they didn’t have money to pay accountant, Emmeline stopped filing documents. Emmeline came to Tax Matters Solutions, agonizing about the situation because her husband didn’t know about it. She imagined a tax liability of over $100,000.

In her initial assessment consultation, Tax Matters Solutions discovered that instead of the $100,000 she expected her tax liability was about $40,000. But examining her accounting, they found a way to save Emmeline $20,000 in taxes simply in the way she set up her payroll. With a bit more research, they reduced her tax liability by an additional $5000. This initial assessment consultation cost Emmeline $500. To her great relief, she found herself with a $15,000 tax liability instead of the $100,000 she imagined.

If you’re facing (or think you’re facing!) a large tax liability, there’s a lot you can do to minimize it.

1. Act sooner rather than later.
2. Even if you’ve never kept accounts, start now by setting up an accounting system.
3. Keep or collect all your paperwork related to your business.
4. Research taxes for people in your industry.
5. Hire a tax accountant for help with tax saving strategies.

Most CPA’s don’t have the requisite skills to work in an environment of tax delinquency and accumulated tax problems. “It takes certain skills and also a level of understanding to work through some of these special issues,” says Jernigan. “We can work on even the largest tax problems without judgment, because this is our expertise.”