You’re Paying the IRS. So Why Is Your Tax Problem Getting Worse?
Inside IRS Collections™ | Chapter 9
Lessons from a Former IRS Supervisory Revenue Officer
For an operating business, paying old tax debt can feel like progress. But before deciding what to pay, there are two important questions: Is the balance correct? And has the business stopped creating new tax debt?
During my years working IRS collection cases, I met business owners who were genuinely trying to do the right thing.
They knew they owed the IRS. When money became available, they sent some of it toward the debt.
$2,000 toward an old quarter.
Another $3,000 the next month.
Maybe $500 when cash was especially tight.
To the owner, those payments meant something: I’m trying. I’m paying down what I owe.
But sending money to the IRS and resolving an IRS problem are not necessarily the same thing.
Before deciding how much to pay, it helps to understand what created the balance, whether the amount is correct, and whether new tax debt is still accumulating.
Before Paying the Balance, Understand the Balance
An IRS balance doesn’t always tell the whole story.
Cases came into my inventory where part—or even all—of the assessed balance could be addressed by identifying an administrative or processing problem.
Payroll tax cases provide a good example.
Certain employers are required to file Schedule B with Form 941 to report when their payroll tax liabilities arose during the quarter. A Schedule B might be missing, become separated from a paper return, or not process correctly.
When the IRS doesn’t have the information needed to determine the actual liability dates, it may calculate the failure-to-deposit penalty using an averaged method.
For a business with substantial payroll, the difference can be significant.
A penalty calculated incorrectly for one quarter can be costly. When the same issue affects multiple quarters over several years, the penalties can add up to tens of thousands of dollars.
I encountered situations like this as a Revenue Officer. Resolving a collection case didn’t always begin by asking the taxpayer for money. It began by figuring out why the balance existed.
In fact, early problem identification occasionally resolved the entire collection case.
I might discover that the issue wasn’t unpaid tax, but an account or processing problem that needed to be corrected. Once I obtained the right information and the account was fixed, there could be nothing left for me to collect.
Those were some of my favorite cases.
The taxpayer no longer faced a collection problem that shouldn’t have existed, and I could close a case from my inventory knowing the account was correct.
It was a win-win.
Of course, most IRS balances aren’t going to disappear through an account correction. But those experiences taught me a lesson that still shapes how I approach collection cases today:
Before deciding how to resolve an IRS balance, understand why the balance exists.
That means looking at questions such as:
Is the underlying tax correct?
Were payments and federal tax deposits properly credited?
Were all required returns and schedules processed correctly?
Are the penalties based on accurate information?
Is there an administrative or processing problem affecting the account?
How much of the balance represents tax, penalties, and interest?
This doesn’t mean taxpayers should assume an IRS balance is wrong. It means they should understand what they’re being asked to pay before building a strategy around that number.
Paying Old Taxes While Creating New Taxes Isn’t a Solution
Once the balance is understood, the next priority for an operating business is usually stopping the problem from growing.
Consider a business that owes $100,000 and has $5,000 available.
Sending that $5,000 toward the old balance seems like obvious progress.
But what happens if doing so leaves the business unable to make its next required payroll tax deposit?
The old balance went down, but a new liability began.
This can become a cycle.
The business pays toward an older quarter. Cash gets tight. A current deposit is missed. Another liability develops. More penalties and interest may follow. Another notice arrives.
The owner keeps paying, yet the overall tax problem never seems to go away.
Good intentions aren’t enough when the underlying system isn’t working.
Stop the Problem From Growing
Current compliance matters when dealing with IRS collection.
There is a practical reason.
Before developing a sustainable plan for yesterday’s debt, an operating business needs to be able to meet today’s tax obligations.
That changes the first question.
Instead of immediately asking:
“How much can we pay toward the old debt?”
Ask:
“What needs to change so we don’t owe another dollar next quarter?”
The answer may require looking beyond the IRS account.
Is payroll being handled correctly?
Are federal tax deposits being made when required?
Are returns being filed on time?
Does the business reserve money for taxes before spending it elsewhere?
Is the business generating enough cash to cover payroll, taxes, operating expenses, and the owner’s needs?
Or is next week’s money constantly being used to pay last month’s bills?
Those questions can reveal a problem that another payment to the IRS won’t fix.
The IRS Problem May Also Be a Business Problem
Many business owners I encountered during my IRS career were very good at what they did.
They repaired cars.
Ran restaurants.
Sold products.
Provided services.
Practiced a trade.
They knew their craft.
Running the financial and administrative side of a business required a different skill set.
Owners might be responsible for customers, employees, payroll, bookkeeping, vendors, taxes, and a growing stack of IRS correspondence—all while continuing to perform the work that actually generated the revenue.
Eventually, the system could break down.
By the time some cases reached me, the business had received IRS notices quarter after quarter, sometimes for years. The owner had reached the point where trying to understand another letter felt almost pointless.
That didn’t necessarily mean the owner didn’t care.
Often, the business simply lacked a workable system for staying compliant.
Another payment toward the back taxes wouldn’t fix that.
Understand the Entire Case
IRS collection problems are also difficult to solve one notice at a time.
A notice arrives. Make a payment.
Another notice arrives. Call the IRS.
A levy warning arrives. Find more money.
The business becomes reactive.
A better approach is to understand the entire case before deciding how to resolve it.
That can include determining:
Which tax periods have balances due
Whether all required returns have been filed
Whether current federal tax deposits are being made
Whether payments and deposits were properly applied
What penalties have been assessed and why
Whether a Revenue Officer has been assigned
Whether enforced collection is underway or approaching
Whether responsible individuals could face Trust Fund Recovery Penalty exposure
What the business can realistically afford while remaining current
Only then does the resolution discussion have the right foundation.
Protecting Current Compliance May Require Difficult Choices
When cash is limited, every dollar already has a job.
Payroll.
Rent.
Vendors.
Insurance.
Current taxes.
Old tax debt.
There may not be enough money to satisfy everyone at once.
A business may need to change how it operates before an IRS resolution can become sustainable. That could involve better bookkeeping, changes to payroll procedures, tighter expense controls, reserving tax deposits before other spending, or confronting whether the business can support its current structure.
There is no single answer for every business.
But paying yesterday’s taxes at the expense of today’s compliance can create the appearance of progress without actually solving the problem.
Then Deal With What Is Actually Owed
Getting current doesn’t erase the old debt.
Correcting an account problem doesn’t mean the legitimate remaining balance disappears either.
Both steps put the business in a better position to deal with the real problem.
Once the account has been reviewed, compliance has been stabilized, and the business understands its financial position, attention can turn to an appropriate resolution.
Depending on the facts, that could involve a payment arrangement, collection alternatives, penalty relief where appropriate, or another resolution strategy. Cases involving payroll taxes, Revenue Officers, liens, levies, or potential Trust Fund Recovery Penalty liability may require additional work.
The right path depends on the facts.
That is why I don’t believe an IRS collection case should begin and end with:
“How much do you owe?”
A better approach is:
Understand the balance.
Stop the problem from growing.
Then build a strategy for what is actually owed.
Strategy Over Force™
IRS pressure creates a natural urge to act.
Send money.
Call the number on the notice.
Deal with whatever letter arrived most recently.
Immediate action may be necessary, particularly when collection deadlines or enforcement actions are involved.
But activity and progress aren’t always the same thing.
A sustainable IRS resolution should address more than the number showing on today’s notice. It should identify why the balance exists, correct problems where appropriate, stop new liabilities from developing, and then deal with the remaining debt.
If your business keeps sending money to the IRS but the tax problem never seems to go away, the next question may not be:
“How much should I send?”
It may be:
“What problem are we actually trying to solve?”
That is where strategy begins.
Brandon Lynch, EA
Founder & Managing Member, Lynx Tax Advisors
Former IRS Revenue Officer & Supervisory Revenue Officer
Brandon Lynch, EA, is the Founder and Managing Member of Lynx Tax Advisors. Before entering private practice, he served with the IRS as a Revenue Officer and Supervisory Revenue Officer. His work focuses on IRS collection representation, helping individuals and businesses understand enforcement risk, respond to the IRS, and pursue resolution strategies grounded in their actual circumstances.
This article is provided for general educational and informational purposes only and does not constitute tax, legal, or financial advice. Every tax matter depends on its specific facts and circumstances.
© 2026 Lynx Tax Advisors. All rights reserved. Inside IRS Collections™ and Strategy Over Force™ are trademarks of Lynx Tax Advisors.