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Avoiding Prosecution for Tax Evasion: 7 Strategies for High-Income Taxpayers Facing Collection

January 31, 2025

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For high-income taxpayers who are facing collection by the Internal Revenue Service (IRS), failing to take decisive action can have significant financial consequences. Reversing and recovering from IRS collection actions can be far more difficult (and costly) than preventing them in the first place, and facing IRS collection presents additional legal risks as well. Here are seven strategic considerations for high-income taxpayers who find themselves in this scenario from Texas tax collection attorney Lawrence Brown.

1. Engage Tax Counsel to Reassess Your Federal Tax Liability

If you are facing IRS collection, one of the first steps you will want to take (if you have not done so already) is to engage tax counsel to reassess your federal tax liability. Tax professionals and revenue agents can (and do) make mistakes, and if the IRS is seeking to collect more than you are legally obligated to pay, resolving this discrepancy should be your first priority.

Many high-income taxpayers rely on sophisticated tax planning strategies, and many of these strategies have come under enhanced scrutiny from the IRS in recent years. If the IRS has wrongfully accused you of using an abusive tax shelter or otherwise evading your federal tax liability, you should not be at risk for collection.

2. Assess the Viability of Filing an Appeal

If you have grounds to argue that the IRS has incorrectly determined your federal tax liability, you will want to work with your Texas tax collection attorney to assess the viability of filing an appeal. High-income taxpayers can pursue appeals on various grounds, and for those facing collection, filing an appeal will be a sound approach in many cases.  

When pursuing appeals, high-income taxpayers can also seek a stay of collection as well. As their appeals progress, high-income taxpayers (and their tax counsel) can also engage with the IRS to informally pursue a redetermination of liability and/or a settlement agreement as warranted.

3. Assess the Viability of Settling with the IRS

High-income taxpayers who are facing collection will also want to work with their tax counsel to assess the viability of settling with the IRS. This is true regardless of their ability to pay. If avoiding liability entirely through an appeal is not an option, then settling with the IRS might be the next-best option.

The IRS routinely engages in settlement negotiations with high-income taxpayers, as collecting some of the amount owed is often more desirable than incurring the costs of litigation and collection on behalf of taxpayers at large. If seeking a settlement is your best option, you will need to engage an experienced Texas tax collection attorney to negotiate with the IRS on your behalf, and you will want to work closely with your attorney to make an informed decision about how much liability you are prepared to accept.

4. Assess the Viability of Seeking Currently-Not-Collectible Status

Another option in some situations may be to seek currently-not-collectible status. As the IRS explains, “[b]eing currently not collectible does not mean the debt goes away, it means the IRS has determined you cannot afford to pay the debt at this time.” Additionally, as the IRS goes on to explain, “if we do delay collecting from you, your debt will increase because penalties and interest are charged until you pay the full amount.”

Since seeking currently-not-collectible status does not finally resolve your tax debt (and the amount of your debt will continue to increase while it remains pending), this won’t be the best solution for many high-income taxpayers. Additionally, even though the IRS cannot pursue collection while your tax debt is deemed non-collectible, it can still file a Notice of Federal Tax Lien to facilitate collection in the future if necessary. With that said, it is worth considering all of the options that are available, and seeking currently-not-collectible status could be a good short-term solution as part of a larger strategy for favorably resolving your tax debt with the IRS.

5. Ensure that You Are Currently in Compliance with Federal Law

When facing IRS collection for past-due tax liability (or allegedly past-due tax liability), it is important to ensure that you are currently in compliance with federal law. This will help ensure that you are in a favorable position for negotiating with the IRS, and it will also help ensure that your efforts to avoid collection do not lead to additional liability. If you have concerns about your current tax compliance status, you will want to discuss your concerns with your tax counsel before engaging with the IRS or filing an appeal.

6. Work with Your Tax Counsel to Assess Other Options as Necessary

While the options discussed above are some of the most common strategies we use to protect our clients who are facing IRS collection, these are by no means the only options that are available. Once you engage a Texas tax collection attorney to represent you, you will want to work closely with your attorney to assess all of the options that are on the table. Favorably resolving high-stakes tax controversies requires an informed and custom-tailored approach, and what makes sense for someone else won’t necessarily make sense for you.

7. Take Action Promptly, Decisively and Proactively

Finally, regardless of the specific steps you need to take to protect yourself, acting promptly, decisively, and proactively will be key. You should not wait to see if the IRS pursues collection action, and strict deadlines apply when seeking certain forms of relief. Once again, an experienced Texas tax collection attorney can help you make informed decisions about how best to proceed, and then your attorney can take all necessary legal action on your behalf.

Request a Confidential Consultation with Texas Tax Collection Attorney Lawrence Brown

If you need to know more about your options for avoiding IRS collection as a high-income taxpayer, we invite you to get in touch. To request a confidential consultation with Texas tax collection attorney Lawrence Brown, please call 888-870-0025 or inquire online today.

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