IRS Tax Problems: Prevention and Resolution
Tax problems come in various forms, one of which is IRS tax problems. Tax authorities are incessantly increasing their tax enforcement efforts through tax collection and tax audit.
When taxpayers receive the dreaded tax notice from the authorities that their tax return or their business is going to be audited and examined, first and foremost, what they should do is seek professional tax advice. Same thing applies when taxpayers receive collection letters threatening levying and garnishing their wages or paychecks, or the tax levy letter for their bank account, taxpayers should get professional tax advice to resolve their tax problems.
How to prevent IRS problems
Tax planning is imperative to preventing surprises on April 15th. If for the period of the year you undergo a major adjustment in life, you have lost a job, changed your career, you have become a self-employed person, you have changed your marital status, you have gained or lost an employee, bought or sold a house, cashed a plan of retirement – so it’s essential to sit down with your tax professional to crunch the numbers. This way you can start saving and paying up front for an impending tax burden or discuss other ways to reduce it. You have to do this kind of planning now – not in December, and surely not on April 14th.
Before filing your tax return, check to make sure that all your income and expenses have been correctly recorded. Compare your original documents with those listed to guarantee exactness. And be sure to keep copies of all significant receipts in case of an audit. A tax debt often occurs due to items not allowed in verification.
Bring into play a bona fide tax professional whose office is open all year round. Make sure your tax professional is licensed. Use a proficient public accountant, a registered agent or a lawyer, especially if you have a complex tax return because you own rental properties, unusual investments, or are self-employed.
How to solve IRS problems
The first choice that anyone who receives a notice from the Internal Revenue Service has is to pay the full amount given in the notice. This is the best option for those who want to prevent any confrontation with the IRS.
Although people who don’t want to get associated in legal matters pertinent to tax issues because they don’t know what to do if they have tax problems see this as the most suitable way, but in reality it is not, because the tax invoice that the IRS sends is often incorrect .
If you are not able to pay the balance in full, but you believe you can pay it over time, ask for an installment agreement. This can be completed online on the IRS website using its online payment agreement application. Your application will be acknowledged if your debt is less than $ 100,000, but you can pay the balance in no time. It is also feasible to request an installment agreement when filing the tax return by including the form 9465 with the return. There is a charge for an installment agreement. However, the fee is reduced if you choose an automatic debit from your bank account. In the event of default, the installment contract will be given up for loss and the IRS will either want to pay in full or may attempt to withdraw its bank account or salaries. If you can’t make a monthly payment,
If you are not able to settle your balance because you have lost your job, has been disabled or some other event has occurred that precludes payment of your debt, the IRS may be certain that “it is currently not possible to collect.” After accepting this status, the IRS will liquefy all the collection efforts. Penalties and interest will continue to build up, but you will not have to worry about your bank account, your home or your income. If you send a tax return showing a step up in your finances, the IRS will contact you to set up the payment methods or possibly make you unexplored again. Complete the 433F form. Use a set of national standards to determine how much is allowed for accommodation, groceries, vehicle expenses, health care, etc. Consult a bona fide tax professional with experience in this area to put you through.
If your financial situation seems to be a lasting problem, for example you are 65 years old, disabled and in social security with no other basis of income, then you may qualify for a compromise offer. This process allows you to offer a lump sum (which can be paid in installments) for the tax debt. The amount for which the IRS will settle is based on a special formula that uses your financial information. To find out if you are qualified, use the OIC Pre Qualified questionnaire on the IRS website. Usually, it is advisable to have a professional who specializes in this area to help you. But always be cautious. There are many deceitful individuals who assure relief but do not make it available.
Installment Agreement: paying the tax amount through an installment agreement is a regular way to resolve your tax problem. You should try to get professional tax advice, as the taxing authority will usually ask for a large monthly payment, while professional tax representatives will work on establishing an installment agreement that is reasonable and you can live with without causing financial and economic hardship on you and your family.
Offer in Compromise: An offer in compromise, OIC, will usually be acknowledged by the taxing authority to resolve your tax problem if the amount offered to settle your tax problem is equal or goes beyond the taxpayer’s Reasonable Collection Potential, RCP. The IRS, or the State, or the Sales Tax Agency determines RCP by using the financial analysis tools like the 433-A for individuals and 433-B for business entities.
No matter which option is exact to resolve your tax problems, usually there exists more than one feasible option, it is fundamental that the taxpayer act in accordance with the tax law going forward. That is, all tax returns are filed timely; all approximated income taxes and payroll deposits must be paid in due times. A knowledgeable tax professional who specializes in tax representation would be the best person to have in your corner so you can solve your tax problems when the IRS Tax Agency contacts you.
