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Contents
5 Tips
IRS Problems Definitions
Solutions to IRS Problems
Helpful Forms
5 Tips Taxpayers Must Know Before You Speak With the IRS
- Tip No. 1 - Stop Enforcement Action
Individuals and businesses that find themselves the target of
IRS enforcement action may stop the IRS in their tracks by filing
form 12153. The purpose of form 12153 is to request a hearing
with the Internal Revenue Service regarding a particular position
that the IRS has taken, such as a wage or bank levy. Once this
form is properly filed the IRS is required by law to place a
hold on enforcement action. Please be advised that form 12153
should not be used as a delay tactic, in that once a hearing
is granted the taxpayer must clearly present their position otherwise
the original action taken by the IRS will be upheld.
- Tip No. 2 - Avoid Signing Form 900
Taxpayers should be aware of what I call the ten-year rule. The
Internal Revenue Service has a ten-year period to collect the tax
due from taxpayers. IRS personnel are well aware of the ten-year
collection statute. Some IRS agents will recommend that taxpayers
seeking an installment agreement sign a waiver to extend the collection
statute. They are well within their rights to do so. We advise
our clients to explore other options such as an Offer-in-Compromise,
rather than allow the Internal Revenue Service additional time
to collect the tax. To determine how much time is left on your
collection statute, ask a CPA to request a record of account from
the Internal Revenue Service.
- Tip No. 3 - Utilize Uncollectible Status
The Internal Revenue Service has a classification titled uncollectible
status for taxpayers unable to make monthly payments on their tax
debts. The IRS will allow taxpayers to get their financial house
in order. Taxpayers seeking this classification must disclose their
financial condition to the IRS. Once your account is regarded as
uncollectible you are not required to make monthly payments and
the IRS will stop all enforcement action. However, interest and
penalties on the unpaid balance will continue to accrue. Accordingly
uncollectible status should be requested as a temporary and not
a permanent solution to your problem. Taxpayers may be reclassified
from uncollectible to collectible at any time or when their income
increases. At such time enforcement action will continue.
- Tip No. 4 - Consider the Offer in Compromise Program
Consider filing an Offer in Compromise to reduce your tax debt.
An offer in compromise is a legal agreement between the IRS and
the taxpayer in which the original tax liability plus interest
and penalties are reduced. Preparing and successfully negotiating
an Offer in Compromise is a complicated process. A taxpayer’s
assets and projected income are factors which determine the amount
to be offered. However, understanding when to include and exclude
certain assets such as retirement plans is critical, in that
it could save thousands of dollars. Taxpayers who file successful
Offers must remain in compliance with the Internal Revenue Service
for 5 years. All future income tax returns must be filed timely
without any unpaid balances.
- Tip No. 5 - Avoid Direct Contact with the IRS
You do not have to speak with the IRS. As a taxpayer you have a
right to have an independent CPA handle all correspondence. Be
sure to consult with a CPA before you say something to the IRS
that you may regret. Remember, the IRS employees are paid to look
out for the government’s interest, not yours.
IRS Problems Defined
Many types of IRS problems are confusing because you can’t always
get accurate information. Most taxpayers do not feel comfortable
calling the IRS for answers, that’s why make sure that we maintain
all contact with the IRS on your behalf. Below is a list IRS Problems
defined to help you obtain a better understanding of these problems.
Potential 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 use the expertise of CPA 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 view the possible IRS solutions below to help
gain a better understanding on how your IRS problems may be resolved.
Helpful Forms
- 2848 – Power of Attorney
- 433A – Collection of Information Statements for Wage Earners and
Self-Employed Individuals
- 433B – Collection Information Statement for Businesses
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