Using the 5 Whys to Understand Why You Got into IRS Tax Debt in the First Place

Life doesn’t always go according to plan, despite our best intentions. When we get into tricky situations, it can be helpful to know what went wrong–so we don’t make the same mistakes in the future. The “5 Whys” provides a simple yet powerful framework for doing so. Especially when it relates to IRS tax debt.

Developed by the Toyota Motor Corporation in the 1950s, the 5 Whys is a tool that helps you drill beneath the superficial. First, you state the challenge. Then you ask yourself—why is this occurring? The answer then becomes your second statement. Then you ask yourself why that’s occurring. You keep probing recursively like this until you arrive at a fundamental truth—the root cause indirectly responsible for the symptoms causing you suffering. By addressing this cause, you can then effectively wipe out the more superficial issues.

That may all sound a little abstract, so let’s illustrate with an example. Let’s say you owe an IRS tax debt of $25,000:

WHY #1: Why did I end up owing the IRS $25,000?

ANSWER #1: Well, my wife and I didn’t realize how much we were overspending last year.

WHY #2: Why didn’t you realize how much you were overspending?

ANSWER #2: A lot was going on. We just welcomed our second child, and she needed to take 4 extra months off work because of a medical issue. Meanwhile, my business slowed down because of oddball factors related to our local economy. So we just got blindsided by bad luck.

WHY #3: Why did you get blindsided by bad luck?

ANSWER #3: Hmm, well maybe the real reason is that we had been (and still are) skating by without any long term financial plan or strategy.

WHY #4: And why haven’t you taken time to create that plan?

ANSWER #4: Maybe because we’re scared that if we take an honest look at our financial future, we’ll have to make hard choices—and possibly give up on (or seriously delay) some of our dreams.

WHY #5: And why does this make you scared?

ANSWER #5: You mean fundamentally? Probably because, constitutionally, I just have a hard time making tough choices.

Do you see the power of this exercise? What starts off as a dry, simple problem—a $25,000 IRS tax debt—turns out to have its origins in a fundamental fear/personality issue. But once you understand the true issue, you can do something constructive about it! In this case, maybe the person can get coaching about how to be more decisive.

If you want to get to the root of why you owe the IRS money and solve the problem for good, the Highland Tax Resolution team is here to help. Call us at 720-398-6088 for powerful insight into your challenges!