IRS Solutions
Many solutions exist for taxpayers facing
IRS Problems today. Sometimes the solutions are very simple and can be handled
yourself. In more serious situations you should find a local CPA, Attorney, or
Enrolled Agent who understands how to use these solutions in your best interest.
The IRS is a Federal Agency that is
divided up into local Districts across the country. Each of these local IRS
District offices solves standard IRS problems in a slightly different manner.
For example some IRS Districts believe that seizing taxpayer assets is a
desirable way to collect taxes, while other districts would rather set up a
payment plan.
You can click on the possible IRS
solutions below to help gain a better understanding of how your IRS Problems may
be resolved.
IRS Payment
Plans
Penalty Abatement
Audit
Reconsideration Appeals
Offer in Compromise
Collection
Appeal
Expiration of
Statute
Innocent Spouse
Bankruptcy
Freedom of
Information Requests
IRS Payment
Plans - The IRS will always accept some type of payment arrangement for past
due taxes. In order to qualify for a payment plan with the IRS you must meet the
following rules and provide the IRS with this information: You must have filed
all tax returns. (It's OK to owe money but you must file) You will need to
disclose all assets owned including all cash and bank accounts. You must not
have adequate cash available in a checking, savings, money market, or brokerage
account to pay the IRS. You must not have the capacity to borrow the amount owed
to the IRS from other sources (i.e., a second mortgage on your home). You must
not have adequate equity in a retirement account from which you can borrow or
liquidate; for example, IRA's or 401K's. Assuming that you comply with the above
list, then you can proceed to arrange a repayment of taxes with the IRS. The
negotiation with the IRS will either take place over the phone with ACS
(Automated Collection System), or in person with an IRS Revenue Officer.
The total dollar amount you owe usually
dictates with whom the negotiations will be handled. Typically, IRS Revenue
Officers are not involved in cases where the amounts owed are less than $20,000.
The IRS will ask you to complete a personal financial statement and if a
business is involved, then you will need a business financial statement. The IRS
has determined allowable monthly expenses for individuals, which will be matched
against your actual monthly expenses. The difference between your monthly income
and your allowable monthly expenses will be the amount that the IRS will require
you to pay on a monthly basis.
These monthly payments will continue until
your outstanding tax liabilities are paid in full. WARNING! The IRS continues to
add penalties and interest while you are making monthly payments.
This may cause you to be paying what you
consider a large monthly payment to the IRS and your outstanding balance may in
fact be increasing due to additional penalties and interest.
The IRS will not explain this to you! Be
careful!
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Penalty
Abatement - The IRS issued over $18,000,000,000.00 (that's 18 Billion
Dollars) in penalties during 1999. This is a huge number. If you're one of these
taxpayers, there is hope. Taxpayers that are hit with IRS penalties can request
the penalties to be abated. Abated means to completely or partially remove. In
many cases where a taxpayer requests abatement, the IRS removes 100% of the
penalty.
The IRS requires that you have a good
reason to request penalty abatement. What qualifies as a good reason? It depends
on the circumstances involved with your particular situation.
The IRS procedures for deciding who
qualifies for penalty abatement and for what reason seem to differ in each case.
The best thing you can do is to request that the IRS abate your penalties by
providing the circumstances surrounding your situation.
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Audit
Reconsider Appeals - This little known IRS program can be used to reopen a
closed audit. The IRS rules on audits are very clear and when an audit is over
it's usually over. However the IRS has this program to handle situations where
the taxpayer didn't get a fair deal in the original audit. For example the
taxpayer may have never attended the original audit because they never received
the audit letter or the taxpayer didn't understand what was going on and failed
to provide the IRS information they requested.
There are many situations in which a
taxpayer may qualify for Audit Reconsideration. The point is that any taxpayer
that feels they didn't get a fair deal in their original audit can make a
request for audit reconsideration.
Sometimes many years have gone by before
taxpayers realize how much they owe the IRS for an old audit. Even in these
cases where the time limits to appeal or file a tax court petition have long
since expired, the taxpayer can still request audit reconsideration.
When the IRS agrees to audit
reconsideration the taxpayer's case is assigned to an auditor to reopen the
taxpayers audit. The taxpayer is then given the opportunity to have the original
audit changed.
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What is an Appeal? An Appeal is a request
by a taxpayer that does not agree with an IRS decision. The action of filing an
appeal puts the IRS on notice that the taxpayer doesn't agree with the IRS and
is seeking a meeting to change the IRS decision. The goal of the IRS Appeal
Division is to "settle" disputes between the IRS and taxpayers.
The most common IRS decision which is
appealed is that of an IRS Audit where the IRS has increased the taxpayer's tax
liability. Often this increase includes additional penalties and interest.
The taxpayer must file an Appeals request
within a certain time frame and follow the IRS guidelines for a valid Appeal's
request. If a taxpayer doesn't file their Appeal request correctly and on time,
they may lose their opportunity to have an Appeals officer listen to their side
of the story.
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Offer in Compromise
- The IRS Offers in Compromise program provides taxpayers that owe the IRS more
than they could ever afford, a chance to pay a small amount as a full and final
settlement. This program also offers taxpayers that don't agree that they
actually owe the taxes in the first place, a chance to file an Offer in
Compromise and have those tax liabilities reconsidered. The Offer in Compromise
program allows taxpayers to get a fresh start. All back tax liabilities are
settled with the amount of the offer. All federal tax liens are released upon
IRS acceptance of an Offer in Compromise and payment of the amount offered.
An offer filed based on the taxpayers
inability to pay the IRS looks at the taxpayer's current financial position and
considers their ability to pay as well as their equity in assets. Based on these
factors, an Offer amount is determined.
Taxpayers can compromise all types of IRS
taxes, penalties and interest. Even payroll taxes can be compromised. The IRS
accepts approximately 50% of all Offers filed with the average amount accepted
is 14 cents on every dollar owed. If you qualify for this program you can save
thousands of dollars in taxes, penalties and interest.
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Collection
Appeal - The Collection Appeal is an Appeal by a taxpayer that has been
threatened with an IRS Levy or Seizure. This threat could have been received
either verbally or in writing. The IRS allows you to file a Collection Appeal in
these situations before they follow through on their levy or seizure. The
Collection Appeal is filed on a one page form where the taxpayer is given the
opportunity to explain how they think the situation could be solved without the
IRS levy or seizure. .
Your Appeal is assigned to an Appeals
Officer who is required to make a decision on your Appeal within five days.
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Expiration of
Statute - The IRS has 10 years from the date of assessment (usually close to
the filing date) to collect all taxes, penalties and interest from the taxpayer.
The taxpayer does not owe the IRS anything after the 10-year date has passed. As
with all IRS rules, there are exceptions to this rule. Some examples are, if the
taxpayer agrees in writing to allow the IRS more time to collect from them or if
the taxpayer files bankruptcy during the 10 year period. In both of these
situations the period for the IRS to collect is extended for a specific time.
Taxpayers that are approaching this
10-year date should request copies of their IRS transcripts to verify the
assessment date, so they can accurately compute when the 10-year statute to
collect will expire.
If the IRS is attempting to collect a tax
liability which has expired under the 10 year statute, then the tax payer must
inform the IRS in writing that they no longer have the right to collect this tax
liability. If the taxpayer is correct, the IRS will write off the tax
liabilities which have expired.
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Innocent Spouse
- Taxpayers often find themselves in trouble with the IRS because of their
spouses or Ex-spouse's actions. The IRS realizes that these situations do in
fact occur. In order to help taxpayers that are being subjected to IRS problems
because of their spouse's actions, the IRS has come up with guidelines where a
person may qualify as an innocent spouse. This means that if a taxpayer can
prove they fit in those guidelines, then they may not be subject to the taxes
caused by their spouses or ex-spouses.
The IRS is currently considering new
regulations, which would make it even easier to qualify as an innocent spouse.
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Bankruptcy
- The IRS doesn't like to talk about the use of Bankruptcy to reduce tax
liabilities, but the reality is that many IRS taxes, penalties and interest do
qualify for complete discharge in Bankruptcy. In order for a taxpayer to use the
Bankruptcy laws to avoid paying income taxes, the taxpayer's income tax
liabilities MUST QUALIFY. Many taxpayers file bankruptcy without first
understanding the rules to qualify their own income tax liabilities. This often
results in not discharging income taxes that could have been discharged if the
taxpayer had understood the Bankruptcy laws.
The most common types of taxes eligible
for discharge in bankruptcy are old individual income taxes. Taxes, which are
not eligible for discharge in bankruptcy are Civil Penalties for payroll taxes.
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Freedom of
Information - Many taxpayers just want to know what type of information is
in their IRS file without drawing a lot of attention to themselves. Congress
passed legislation (FREEDOM OF INFORMATION ACT) that requires government
agencies, including the IRS, to disclose such information when requested.
Freedom of Information documents can also be used to explain why, how, when and
where a taxpayer's IRS problems started. Having this information is helpful as
it discloses the IRS information used to assess taxes, penalties and interest
against the taxpayer.
Any taxpayer having difficulty in sorting
out what the IRS is doing to them should consider using the FREEDOM TO
INFORMATION ACT to obtain their IRS files. Often the information you receive can
help the taxpayer better understand their IRS problems.
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