Question: Why was I contacted by the IRS?
Answer: The IRS sends notices and letters for the many reasons, not limited to the following: you have a balance due, your refund has been adjusted, the IRS changed your return based on conflicting information, and many others.
The important thing is to read and understand the entire notice. You may agree with the IRS's changes and no action is necessary. But if you don't agree, you need to know how to respond and be able to substantiate your position.
The link below is a good starting point if you've been contacted by the IRS.
Question: I feel helpless and totally outgunned by the IRS; what should I do?
Answer: Knowing your taxpayer rights gives you leverage when resolving your IRS problems. Instead of feeling powerless when up against potentially crushing back taxes and IRS penalties, knowing your rights as a taxpayer or having a qualified and experienced CPA, Enrolled Agent or tax attorney that is also a Certified Tax Resolution Specialist on your side is the best way to understand all the options available to you for permanently solving your tax troubles.
We know that IRS tax problems can cause an immense amount of fear and anxiety. We take that fear away by knowing the Internal Revenue Service inside and out. Our mission and passion is to provide tax help to those who feel hopeless against the IRS. Our role is to negotiate the lowest possible IRS payment amount allowed by law. But you have to get the ball rolling--go to our contact page and send us your most basic question to get started.
Question: I don't have the money to pay, should I still file my tax return?
Answer: Yes! Many people don’t realize that the IRS charges a penalty of up to 25% just for filing your tax return late. That’s right; you will get hit with an additional 25% of what you owe if you miss the deadline for filing individual tax returns. It’s even worse for payroll tax returns.
What most people don’t know is that you can file ANY tax return on time and AVOID THE 25% penalty even if you don’t send in the money that is owed on the return. We see so many people who could have saved THOUSANDS OF DOLLARS on penalties if they just knew this one thing. So in the future no matter what is going on in your life, file all tax returns on time even if you don’t send in the money owed with the return
Yes, of course you’ll get an ugly letter from the IRS for not sending in the money owed but, so what, you will have avoided a 25% penalty.
Question: Can I really negotiate a deal with the IRS?
Answer: The IRS does make deals on taxes owing, including all penalties and interest. The requirements are rigid, but if you qualify the results are can be incredible. To qualify for a deal with the IRS, I would suggest that you owe the IRS at least $15,000 and have very little in the way of equity in your assets. Also, you must be using your monthly income to pay your necessary living expenses and not have much or only a small amount left over to pay old taxes.
As stated above, the requirements are rigid for an Offer in Compromise, so In most cases, a properly structured installment agreement is the best option. But we will explore every option to get the lowest settlement.
Question: Am I stuck with all the penalties the IRS has already assessed?
Answer: The IRS has over 148 different types of penalties they can hit you with. And the worst part is that the IRS can also charge interest and additional penalties on the original penalty.
Penalties can be such a high percentage of the total amount owed to the IRS, it usually makes sense to consider requesting the IRS to reduce all penalties to ZERO.
IRS penalties can often be reduced if you have "reasonable cause". What makes up reasonable cause you ask? Well, in our experience in negotiations with the IRS, anything may qualify as long as it’s reasonable.
We’ve had the IRS abate penalties for medical reasons, bad accountants, and ignorance of the tax laws, ex-spouses, helping to provide care for a loved one, military call-ups, fires, floods, alcoholism, drug abuse, death and even for relying on IRS advice.
The trick to getting penalties forgiven (or in IRS terms,"abated") is knowing how to present your argument and what type of support to provide.
Question: I owe a lot in back taxes. I’m constantly getting threatening letters from the IRS. This has become a big problem that I have no idea how to solve. Can you help me?
Answer: For what it’s worth, take some comfort in knowing that you are not alone. There are millions of Americans in similar situations, dealing with debt hanging over their heads and concerned about how it will affect their future.
The good news: You have many options. To fully understand and take advantage of your options, we urge you to see a qualified tax resolution professional. He or she will take a close look at your previous returns, looking for mistakes that may have resulted in an inflated tax debt amount. This process alone can substantially lower your IRS debt.
Once you and your qualified tax professional have analyzed your previous returns, the next step is to negotiate a resolution with the IRS. You will most likely be looking at one of two options – the Offer in Compromise or the Installment Agreement.
The Offer in Compromise (OIC) was created for people who owe a substantial amount to the IRS but who, for whatever reason, are unable to pay their tax debt off, even over time.
The Offer in Compromise allows taxpayers to negotiate a settlement amount that will take care of the entire tax debt once and for all. This settlement agreement can lower the tax debt by a significant amount. If you do not qualify for the Offer in Compromise – and to do so you must be able to prove eligibility – then you may consider the Installment Agreement, which allows you to pay off your debt by making manageable monthly payments.
A properly structured Installment Agreement is usually the best option for taxpayers. An OIC is a great option, but it can be really tough to qualify.
Question: I received a notice from the IRS because I did not have the funds to pay the taxes I owed on my 2016 income tax return. I also was late in filing my tax return. Not only is the IRS demanding the tax I owe, but they have slapped on these huge amounts for penalties and interest. I had extenuating circumstances that caused all of this. This isn’t fair…what can I do?
Answer: Your Tax Resolution Specialist can request a removal (abatement) of penalties 2 ways: 1) “First Time” Penalty Abatement and 2) a Reasonable Cause Argument. The IRS writes off billions of dollars in penalties each and every year, but you must know how to do it correctly.
A First Time Penalty Abatement (FTPA) can be requested if you have a “clean” compliance record, meaning you have not incurred a Failure to File or Failure to Pay penalty for the 3 years preceding the year you are requesting the first time penalty abatement on. FTBA is generally granted in most cases, regardless of what the underlying reason is, if you are eligible.
There are 9 main “Reasonable Cause” arguments to get your penalties removed. They are: 1) Death, Serious Illness or Unavoidable Absence 2) Fire, Casualty or Natural Disaster 3) Unable to Obtain Records (common issue with couples going through a divorce) 4) Mistake was made by the taxpayer or tax preparer 5) Erroneous Advice or Reliance on a tax preparer 6) Written/Oral Advice from the IRS 7) Ignorance of Tax Laws 8) Reasonable Cause/Ordinary Business Care and Prudence 9) Undue Economic Hardship.
When using a “Reasonable Cause” argument, the event that caused you to file late or prevented you from paying the tax when due must correlate to the tax years involved and supporting documentation is essential. Your Tax Resolution Specialist will guide through which documents are needed and submit a formal request in writing. For instance, let’s say you were going through a divorce and you ex-spouse withheld records from you needed to file a complete and accurate income tax return and you filed your return last because of this. You could request abatement of these penalties using one of the above reasonable cause arguments, specifically #3 above.
Question: I’m currently separated from my spouse, who owns his own business, and we are in the process of getting a divorce. I have always filed jointly with my spouse and now the IRS is sending me notices stating I owe $35,000. I have no idea how they are coming up with this amount as my spouse said he was paying the IRS.
Answer: You may be able to avoid this liability entirely under the IRS’s Innocent Spouse Relief rules. Under federal law if an income tax return is signed by both husband and wife, both spouses are 100% responsible for the taxes owed. However, the law permits special consideration where a spouse cannot be held responsible for mistakes that are attributable to the other spouse.
If you meet the following criteria you may be able to apply for innocent spouse relief: Your spouse didn’t report all their income; and you were not aware of it and no reason to know about it when you signed the tax return; and it would be unfair to hold you liable for the taxes owed due to your spouse’s error. If you feel you were deceived by your spouse or tricked into signing a return you thought was correct this will help your case too. There are many other ways you may be eligible for relief under the IRS’s innocent spouse rules and we can help sort this out and determine the proper path for resolution.