When people come into my office stressed about IRS letters, liens, or wage garnishments, their first question is usually: “How much do I really owe, and what can I do about it?”
The truth is, just because the IRS says you owe a certain amount doesn’t mean that’s the final word. In tax resolution, everything comes down to two key factors: Liability and Collectability.
Understanding the difference between these two pillars can mean the difference between overpaying or finally finding the fresh start you deserve.
What Is Liability?
Liability asks the question: Is the tax debt legitimate? In other words, does the IRS truly have the right to collect what they claim you owe?
Think of liability as the “Is this bill even correct?” part of the process.
Common liability issues include:
IRS errors: The IRS isn’t always right. Payments get misapplied, numbers are transposed, and assessments can be flat-out wrong.
Unfiled or incorrect returns: If you didn’t file a return, the IRS can file one for you (a “Substitute for Return”). Spoiler: they won’t be generous with deductions or credits. Correcting these returns can significantly reduce liability.
Penalties and interest: These can sometimes exceed the original tax. But if you have reasonable cause—illness, disaster, or bad professional advice—you may qualify for abatement.
Statute of limitations: In certain cases, the IRS may be barred from collecting after a set period.
If liability is in question, the job is to challenge the IRS claim. That could mean filing amended returns, providing documentation, or negotiating for penalty relief.
What Is Collectability?
Even if liability is correct, the next question is: Can the IRS realistically collect it from you?
This is where collectability comes in. It’s not about whether you owe, but whether you can actually pay.
The IRS evaluates your financial situation, considering:
Income (wages, self-employment, pensions, Social Security, etc.)
Necessary living expenses (based on IRS standards—not always your actual expenses)
Equity in assets (home, car, savings, retirement accounts)
If the IRS determines you can’t pay the full debt, you may qualify for relief programs like:
Offer in Compromise (OIC): The IRS’s version of “Let’s settle for less.”
Currently Not Collectible (CNC): Temporary pause on collections if you’re facing hardship.
Partial Payment Installment Agreement: A plan that allows you to pay less than the full balance before the statute of limitations runs out.
Why Both Matter
Liability and collectability are two sides of the same coin:
👉 If liability is wrong, you shouldn’t have to pay in the first place.
👉 If liability is correct, collectability determines what the IRS can reasonably expect from you.
By weighing both, we can create a strategy that fits your situation—sometimes disputing the amount, other times negotiating a settlement based on your ability to pay.
A Real-Life Example
A client once came to me with an IRS bill for over $120,000. Understandably, they were panicked.
First, we reviewed liability. The IRS had miscalculated their self-employment income. Correcting the returns reduced the balance by nearly $40,000.
Next, we looked at collectability. Even with the reduced balance, the client’s financial reality showed they couldn’t pay anywhere close to $80,000. We filed an Offer in Compromise with full documentation. The IRS accepted a settlement of just $7,500.
That’s the power of looking at both sides of the equation.
Brass Tax Moment
The IRS can be intimidating, but you have more options than you think. By breaking the problem down into liability and collectability, you can figure out whether you really owe—and if you do, what you can realistically pay.
If you’ve received notices from the IRS, don’t ignore them. Instead:
Confirm liability: Do you truly owe what they claim?
Assess collectability: Can they actually collect it from you?
Seek professional help: Tax law is complex, and IRS programs aren’t one-size-fits-all.
Knowing your options can make the difference between financial ruin and financial relief.
About the Author
Based in Rockwall, Texas, Karena Burgess brings over 18 years of financial experience, including 8 years on active military duty and 10 years with the Department of Defense. As an IRS Enrolled Agent (EA) and Certified Tax Resolution Specialist (CTRS), Karena specializes in solving complex tax issues and helping individuals stay on track with the IRS.
Contact:
📧 hello@karenaburgess.com
📞 (214) 295-7264
🌐 www.burgesstaxrelief.com
