Don't mess around, get the tax lawyer on it. They know the angles, who to call, what to say. When Joe Taxpayer tries, the bureaucracy just steamrollers him.

Edit: It's the experience of my co-worker that makes me say this.

He, had a problem involving a combination of an incompetent tax filer, a home business (wife ran a day care) and various items related to a couple of adoptions. He was on line for taxes (not owed) penalties, and incipient wage garnishment. The disputed amount was over $20k. The tax lawyer was able to sort out everything except the day care stuff, a minor amount.

(You really want to declare some profit with a home business, or the IRS calls it a hobby and denies all your deductions. No profits are a red flag to the IRS.)