Should I hire a lawyer for my $40k back taxes situation from contractor work?

So I'm in a pretty deep hole with the IRS right now. I recently filed tax returns from 2019-2021 (like only two months ago) when I was doing independent contractor work, and now I'm looking at owing around $40k in back taxes. Talk about a punch to the gut. I've been putting this off for years and finally got the courage to file, but now I'm panicking about how to handle this mountain of debt. The IRS is already sending me notices and I'm not sure what my best move is. Would it be worth it to spend money on a tax attorney at this point, or should I just bite the bullet and try to set up a payment plan directly with the IRS? I honestly have no idea if a lawyer could even help reduce what I owe or if I'd just be throwing more money at the problem. Anyone been in a similar situation or have advice? I'm kinda freaking out here.

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19 comments

Ethan Clark

•8M

While this situation feels overwhelming, you've already taken the hardest step by filing those returns. That's genuinely commendable. For a $40k tax debt, you have several options. The IRS offers payment plans that can spread payments over 72 months. For your amount, you'd qualify for what's called an Installment Agreement. You can actually set this up yourself online through the IRS website without needing a lawyer. However, there might be value in consulting with a tax professional - not necessarily an expensive attorney at first. A CPA or Enrolled Agent with experience in tax resolution could review your situation to see if you qualify for any penalty abatements or if an Offer in Compromise might be possible (settling for less than you owe). One important thing is to avoid ignoring IRS notices. Responding promptly, even if just to request more time, demonstrates good faith and can help your case.

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Ethan Clark

•8M

Yes, interest and penalties will continue to accrue during the repayment period, though the rate of penalty accumulation typically decreases once you're in an approved payment plan. The current IRS interest rate is around 7%, which is adjusted quarterly. The failure-to-pay penalty drops from 0.5% to 0.25% per month once you're in a payment plan, which helps slow the growth somewhat. You might also qualify for penalty abatement, especially for the first-time penalty abatement program if you have a clean compliance history before these years.

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Yuki Sato

•8M

I was actually in a somewhat similar situation last year with about $35k in back taxes from my freelance work that I hadn't properly reported. I was totally overwhelmed trying to figure out my options until I found this AI tool called taxr.ai (https://taxr.ai) that helped me understand my situation better. What was cool is that I could upload all those scary IRS letters and my tax documents, and it explained everything in plain English - like what my actual options were, what penalties I was facing, and whether I qualified for any relief programs. It saved me from panicking and making rushed decisions. Before that, I was getting conflicting advice from friends and random websites that just stressed me out more. The tool helped me understand if a payment plan made more sense than trying to negotiate a settlement and prepared me for what questions to ask when I did speak to a professional.

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Yuki Sato

•8M

It didn't directly reduce what I owed, but it helped me identify that I qualified for the first-time penalty abatement program which saved me about $4,000 in penalties. I wouldn't have known to ask about that otherwise. It's not a replacement for a tax professional, but it helped me understand my situation before I paid for professional help. The cost was way less than what tax resolution firms quoted me. They wanted $3-5k upfront, but taxr.ai was a fraction of that. It was definitely worth it considering the penalty abatement I got and the peace of mind from finally understanding my options.

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Carmen Ruiz

•8M

Just wanted to follow up on my skeptical comment earlier. I actually ended up trying taxr.ai after my own tax mess (smaller than yours, about $18k in back taxes). I was impressed with how it broke down my options and showed me exactly which penalties could potentially be removed. The best part was that it identified that I qualified for reasonable cause abatement due to some health issues I had during the period I didn't file. I printed out the explanation it generated, submitted it to the IRS with my request, and got about $3,200 in penalties removed. Definitely worth checking out when you're facing a big tax bill like this.

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Zoe Alexopoulos

•8M

I had about $25k in back taxes from my business a few years ago and wasted weeks trying to call the IRS to discuss payment options. Literally could not get through to a human after trying dozens of times. Finally found Claimyr (https://claimyr.com) which got me connected to an actual IRS agent within about 45 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c Was skeptical at first but desperately needed to talk to someone at the IRS before they put a lien on my house. The service basically navigates the IRS phone tree for you and holds your place in line, then calls you when an agent is about to pick up. Saved me literal days of hold music and frustration. Once I finally talked to a real person, I was able to set up a reasonable installment agreement and even got some penalties removed because the agent walked me through first-time abatement. Would have been impossible without actually getting someone on the phone.

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Zoe Alexopoulos

•8M

They don't have special access - they use technology to automate the calling and waiting process. Basically, their system calls the IRS and navigates through all the prompts, then waits on hold so you don't have to. When they detect an agent is about to answer, they call you and connect you directly. It's like having someone else wait in line for you. I tried calling right when they opened for weeks with no luck. Maybe you got lucky, but during tax season or when there's high call volume, it's nearly impossible. I'd been trying for over a month before using the service, and I needed to resolve my issue before a deadline. Was worth it to me to finally get it handled.

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Mei Wong

•8M

Well I have to eat my words from my previous comment. After another week of trying to get through to the IRS myself with no success (calling at different times, trying different departments), I broke down and tried Claimyr. Got connected to an IRS agent in about an hour after weeks of failing on my own. The agent I spoke with actually helped me set up an installment agreement with terms better than I expected and explained that I qualified for the first-time penalty abatement program. That alone saved me over $2,000. So yeah, I was wrong - sometimes it's worth paying a little to save a lot. Just wanted to follow up since I was so skeptical before.

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QuantumQuasar

•8M

I went through this exact situation with about $30k in back taxes. Here's what I learned: you don't necessarily need a lawyer right away, but you DO need someone who understands tax resolution. Start with a free consultation with a tax attorney AND an enrolled agent (EA) or CPA who specializes in tax resolution. Compare their approaches and fees. Many offer payment plans. For me, an EA ended up being the best value - they got my penalties reduced through abatement (saved about $5k) and set up a manageable payment plan. They charged me $1,800 total, which was WAY less than the attorney quotes I got ($5k+). Whatever you do, DO NOT use one of those "tax relief" places that advertise on radio/TV. Complete ripoffs charging thousands for what you could do yourself.

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QuantumQuasar

•8M

The EA didn't get the actual tax amount reduced - that's rarely possible unless there are actual errors in how your tax was calculated. What they did get reduced were the penalties, which in my case had added about $7k to my original tax bill. They managed to get about $5k of those penalties removed through the first-time penalty abatement program and reasonable cause arguments. They also made sure I was claiming all legitimate business deductions that I had missed on my original filings, which lowered the taxable income and therefore the tax due. This is different than "negotiating" with the IRS - it's just proper tax preparation that I had failed to do correctly.

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