IRS Tax Problem Help – Use the Table of Contents below to Navigate.
Table of Contents
U.S. Tax Court
Taxpayers who receive a statutory notice of deficiency (also called a 90-day letter) have 90-days to file a tax court petition. After a tax court petition is filed the IRS will “answer” the petition. Additionally, the IRS Office of Chief Counsel will refer the case to IRS Office of Appeals for possible settlement. The tax matter is now a “docketed” appeals case. The word docketed means the case has been assigned a tax court docket number. Additionally, the IRS Appeals Office is granted broad authority to settle docketed appeals cases to avoid the “hazards of litigation.” We believe taxpayers are in the best position to settle a tax matter with the IRS in docketed appeals situations.
Other Advantages of Tax Court:
- Taxpayer does not have to pay the underlining tax to petition U.S. Tax Court.
- Taxpayer may file a tax court petition pro se (without using an attorney).
- U.S. Tax Court rules are very informal compared to other courts.
Disadvantages of Tax Court:
- The IRS Council is going to have a working relationship with the tax court judges.
If your income tax return has been selected for audit you may hire an:
(1) Enrolled Agent;
(2) a Certified Public Accountant (CPA);
(3) an Attorney
to represent you during the course of the audit. The benefit of retaining representation is that you will not communicate directly with the IRS Revenue Agent. Additionally, the tax professional representing you will have experience dealing with IRS. If your representative is an Attorney any communications between you and the Attorney will be protected by Attorney-Client Privilege.
Audit Reconsideration is an IRS procedure created to help taxpayers who disagree with the results of an IRS examination or tax assessment.
Appropriate Situations to Request an Audit Reconsideration:
1-Taxpayer did not respond to IRS audit notice(s) (never sent documentation to the IRS)
2-Taxpayer moved and did not receive audit notices from the IRS
3-Taxpayer has new information or documentation that was never considered during the original audit.
IRS Penalty Abatement
You may qualify for penalty abatement if you made an effort to comply with the tax filing requirements, but were unable to meet your filing obligations, due to circumstances beyond your control. The IRS will consider granting a taxpayer penalty relief for:
(1) Reasonable Cause;
(2) Administrative Waiver (i.e. First Time Penalty Abatement);
(3) Statutory Exception
IRS Installment Agreement
If you are not able to pay your income tax balance in full or within 120 days (after filing your income tax return), you may qualify to enter into a monthly payment plan with the IRS called an Installment Agreement.
The IRS offers various options for making monthly payments:
- Direct debit from your bank account
- Payment through the Electronic Federal Tax Payment System (EFTPS)
- Payment by credit card via phone or internet
- Payment via check or money order
The main benefit of entering into an Installment Agreement with the IRS is that you are no longer in “Collections” which means the IRS will not pursue enforcement actions against you by trying to levy your assets, put liens on your property, or garnish your wages!
However, we advise if you are able to pay your taxes do it to avoid accruing interest and penalties.
If you are an individual and owe $50,000 or less in tax (including interest & penalties) you can apply for an installment agreement online without filing any financial statements (Form 433).
If you are a business and owe $25,000 or less in tax (including interest & penalties) you can apply for an installment agreement online without filing any financial statements with the IRS.
IRS Offer in Compromise
An Offer in Compromise (offer) is an agreement between you (the taxpayer) and the IRS that settles a tax debt for less than the full amount owed.
From the IRS Website: “An offer in compromise allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can’t pay your full tax liability, or doing so creates a financial hardship”.
The IRS will consider the following when viewing an Offer in Compromise:
- Taxpayer’s Ability to Pay
- Taxpayer’s Income
- Taxpayer’s Expenses
- Taxpayer’s Personal Asset(s)
The IRS should approve an offer in compromise when the amount offered represents the amount the IRS can expect to collect within a reasonable period of time. Not all Taxpayers are eligible to submit an Offer in Compromise.
Are you Eligible to submit an IRS Offer in Compromise?
You can check your eligibility here -> IRS Offer in Compromise Pre-Qualifier.
To qualify you must have:
(1) filed all tax returns you are legally required to file,
(2) have received a bill for at least one tax debt included on your offer,
(3) make all required estimated tax payments for the current year, and
(4) make all required federal tax deposits for the current quarter if you are a business owner with employees.
IRS Collection Due Process Hearing
Internal Revenue Code §6330- Notice and opportunity before levy.
§6330(a)(1) “No levy may be made on any property or right to property of any person unless the Secretary has notified such person in writing of their right to a hearing under this section before such levy is made. Such notice shall be required only once for the taxable period to which the unpaid tax…relates.”
A Collection Due Process hearing is the taxpayers chance to challenge the appropriateness of the proposed collection actions and offer collection alternatives. A Collection Due Process hearing is available to taxpayers who have received any of the following notices:
- Notice of Federal Tax Lien Filing and Your Right to a Hearing under IRC 6320
- Final Notice – Notice of Intent to Levy and Notice of Your Right to a Hearing
- Notice of Jeopardy Levy and Right of Appeal
- Notice of Levy on Your State Tax Refund – Notice of Your Right to a Hearing
- Post Levy Collection Due Process (CDP) Notice
TIME IS OF THE ESSENCE! Taxpayers have only 30 days after receiving one of the notices above to request a CDP hearing. If the taxpayer does not make a timely (within 30 days) request for a CDP hearing, the taxpayer may still be able to request an “equivalent hearing.” For a taxpayer to request an equivalent hearing the request must be postmarked on or before the end of the one-year period after the date of levy notice.
What is the difference between a “CDP Hearing” and an “Equivalent Hearing”?
Taxpayers can appeal the final determination of a CDP hearing to the United States Tax Court doing this would stop any collection actions. The final determination of an equivalent hearing cannot be appealed.
A Federal Tax Lien (FTL) is the government’s legal claim against your property for uncollected assessed taxes. This lean is a statutory lien ( IRC §6321) as it arises by operation of law and sometimes referred to as a “silent lean” because the lien is created without notice. A Federal Tax Lien is created by the statute IRC § 6321 which is why it is said to be created by operation of law. It attaches to a taxpayer’s current and future property and rights to property for the amount of the liability. The following must occur for the statutory lien to arise by operation of law:
- An assessment must have been made.
- Notice and demand for payment must have been made.
- The taxpayer must have neglected or refused to pay.
Once the lien exists it is controlled by IRC §6322. The origin date of the lien is the date of the tax assessment, the lien will stay in place until satisfied or until unenforceable due to the expiration of the statute of limitations on the underlining tax assessment.
Notice of Federal Tax Lien (NFTL)- is the public notice filed with the clerk of the county that the taxpayer lives in or has property in. The NFTL puts 3rd parties on notice that the government has rights to the property for unpaid taxes. Additionally, the NFTL informs 3rd parties of the date of lien (date of assessment) for priority purposes.
The Internal Revenue Code authorizes levies to collect delinquent tax. Any property or right to property that belongs to the taxpayer or on which there is a Federal tax lien can be levied unless it is exempted by statute. The taxpayer does have s rights (Collection Due Process Rights).
Trust Fund Recovery Penalty (TFRP)
The TFRP is a penalty provided by IRC §6672 against any person required to collect, account for, and pay over taxes held in trust who willfully fails to perform any of these activities. The penalty is equal to the total amount of tax evaded, not collected, or not accounted for and paid over.
Individuals may be personally liable for trust fund penalties if the IRS can establish:
(1) RESPONSIBILITY the individual had a duty to collect taxes.
(2) WILLINGFULNESS the individual willfully failed to perform the duty.
If the IRS assigns a Revenue Officer to your case to investigate or inquire about TFRP it is our recommendation that you retain counsel.