The Road Out of Debt: Bankruptcy and Other Solutions to Your Financial Problems

Chapter 12. The Way Out of Tax Debt

But in this world nothing can be said to be certain, except death and taxes.

—Benjamin Franklin

The Internal Revenue Service (IRS) is responsible for collecting the money to keep the U.S. government running. This very serious and determined agency possesses numerous powers that allow it to fulfill its duties to the United States.

Anyone would experience a moment of fear if they received a letter from the IRS claiming they owed money on their taxes. After all, the IRS usually has its facts and figures right. When other law enforcement agencies couldn't touch the notorious Chicago gangster Al Capone, the IRS gathered evidence that convicted him of tax evasion and he went to prison for 11 years. The list of celebrities and businessmen prosecuted for tax evasion is endless.

Still, like everyone, the IRS makes mistakes and you may have the grounds to challenge the IRS's claims. Lori Singleton-Clarke, a Maryland nurse, accomplished a rare feat when she stood up against the IRS in tax court and won.^[25] Lori believed she had properly deducted her business school tuition from an online business school. The IRS disagreed, audited her tax return, and denied the deduction. Lori took her fight to tax court without a lawyer. The IRS brought a legal team. Lori impressed the court with her presentation, preparation, and meticulous record keeping. A year after her hearing, the tax court found that she was right in taking the deduction.

Lori's case demonstrates that ...