How This Entrepreneur Got Out From Under $250k in Tax Debt

One of Bench’s partners, Bob Crane of Fix Your Tax Problem, got into the tax resolution business because he knew it firsthand.

He went into huge tax debt after two hurricanes wiped out his Kauai-based kayak business, resulting in years of repayments and bank account garnishment. Eventually, he got into the business of helping others navigate the same predicament he’d been in. Today, Bob partners with Bench to help his clients get their books up to date before embarking on the tax resolution process.

Recently, Bob shared his story with us.

No one ever thinks they’re going to end up owing the IRS over six figures.

I sure didn’t. But that’s exactly what happened to me, thanks to a series of unforeseen, uncontrollable events that put me out of business—twice.

Here’s how it all happened.

Many years ago, I was running a kayak business out on Kauai, catering to the thousands of tourists who came every year. Business was good, I was happy, all was well.

Bob and Mary smaller

Then within a 10-year period, we had two visitors to Kauai that we didn’t anticipate: Hurricane Iwa, in 1982, and Hurricane Iniki in 1992. Iniki, by the way, was the most powerful hurricane to ever strike Hawaii in recorded history.

The first one, Iwa, destroyed my business, along with thousands of others all over the islands. Hotels were wiped out, planes couldn’t land, and tourism just tanked. Rebuilding your business after a natural disaster like that—it’s really hard. You can replace all your boats, go set up on this beautiful beach, and be all ready to go, but if no tourists show up, no real recovery can take place.

I couldn’t pay for much of anything, and that included my taxes. So what did I do? What a lot of people do. I felt a lot of guilt, and I kept putting off dealing with the situation.

For the first month, two, three, I’m thinking, “This is crazy. I’ve got to file these things, but I don’t have any money!” Then three months becomes six, and then a year, and I’m going to file next month, and next month, and next month.

The thing is, if you don’t pay your employees, they stop showing up. If you don’t pay your electric bill, the electricity gets turned off. But if you don’t pay your payroll tax, your excise tax, and you don’t file your tax returns—well, no one comes and turns anything off. Not for a while, at least.

After about five years of not paying and not filing my taxes, I got a knock on the door from the IRS.

“Hello?”

“Are you Bob Crane?”

“Yeah…”

“I’m Agent X with the IRS, and this is my friend Agent Y with the state. You owe us about $180,000.”

You get the picture. I ended up with a 10 year payment plan to repay all the taxes I owed, and in order to keep that plan I had to stay current with what I owed now. I had to make all my current estimated monthly payments on time, plus payments for my back taxes.

When I was about five years into paying back my tax debt—the next hurricane, Iniki, hits.

This time, when my business got destroyed, I said, “I know how this story goes.” I kept paying my taxes so I didn’t get further behind. And while the IRS was still garnishing my bank account to get back what I owed from before, I was able to move back to the mainland and get a job where the weather didn’t determine what happened to my paycheck.

Eventually, life came full circle and I ended up working with a company that helps people just like me—people who get thousands of dollars in debt to the IRS, usually for reasons they couldn’t control or foresee. It could be a cancer diagnosis. It could be the death of a business partner. Or a natural disaster, like I experienced.

We help them settle those debts, sometimes for pennies on the dollar, through something called the tax resolution process.

When someone calls us, the first step in this process involves getting their books in order. Here’s why:

If you’re in debt with the IRS, you probably haven’t filed a tax return—maybe you haven’t filed taxes for several years. Typically, that means the books are out of date or inaccurate, too.

Because of the lack of tax returns, the IRS can only estimate what you owe based on the information they have. Often, that information comes from the vendors or contractors who paid you or received payments from you—they report those payments to the IRS using Form 1099-NEC. The IRS then uses those numbers to figure out what they think you owe, and that’s the number they give you.

Their estimate almost certainly won’t include tax deductions or credits you could have taken. But when your books are accurate and up-to-date, all your expenses are properly categorized. This makes your available tax deductions and credits easy to identify when filing your taxes and can significantly reduce your tax liability.

So that’s why getting your books updated and complete is step one.

Once the books are in order, my team and I work with the taxpayer to figure out their assets, liabilities, and monthly expenses. We calculate these out, and once we have the numbers, we’re able to figure out what the IRS is going to determine the taxpayer is able to pay.

Often, it’s much less than the original number.

At that point, we have a couple of options. We can either set up a payment plan that spans up to 10 years, or if they’re not able to pay monthly, we may be able to settle their tax debt for less then they owe under the offer in compromise program.

The obvious question here is, why can’t a taxpayer just contact the IRS on their own to get the ball rolling? Why do they need to pay someone else to help them out of this situation?

The reason is that if you call the IRS when you owe them tens or hundreds of thousands of dollars, you’re going to be talking to a collection agent who wants to get all the information they can—your assets, your business, your bank account numbers, lines of credit, whether you have any real estate, etc.

When you’re on a high-pressure phone call like that, and you’re already in a panic because you’ve found yourself in this awful financial situation, you’re likely not thinking very clearly. You may make inaccurate statements or agree to pay amounts that you actually aren’t able to—which will get you into even hotter water down the line.

What’s more, the average person doesn’t have an intricate knowledge of how an offer in compromise works or how to get one. They don’t know how to get the best possible outcome that lets them settle their tax debt and move forward with their lives. That’s why we always prefer that people come to our tax resolution company first, before they talk to the IRS themselves.

There’s no doubt that this process is challenging and stressful—getting out of debt always is. But the good news is that no matter how much you owe or think you owe, it is possible to get a fresh start.

How Bench can help

Bench partners with Fix Your Tax Problem to help small business owners get started on the tax resolution process. Our specialized team of historical bookkeeping experts completes years of bookkeeping, fast. Then, we pass the completed records over to our partners like Bob, to begin determining the actual amount you should pay the IRS. We’ve helped hundreds of clients

To see if Bench and our trusted tax resolution partners can help you get out of debt with the IRS, book a free, no-commitment call with our team to tell us your story. We’re here to listen and help you get back on your way to financial freedom.

If you or your business is in need of support, schedule a free consultation with Bench today.

What's Bench?

We're an online bookkeeping service powered by real humans. Bench gives you a dedicated bookkeeper supported by a team of knowledgeable small business experts. We’re here to take the guesswork out of running your own business—for good. Your bookkeeping team imports bank statements, categorizes transactions, and prepares financial statements every month. Get started with a free month of bookkeeping.


This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.

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