Why Experience Matters Series - Part 5
An experienced taxpayer representative will determine who sent an IRS Letter, what is being asked, and provide an adequate and timely response on what is at issue.
If you receive a letter from Collection, the amount of tax is no longer an issue. The debate over how much the tax should be on a return is over unless an audit reconsideration is requested. A Revenue Officer is asking you to pay an amount of tax that has been assessed on a return. You want an experienced representative who can quickly ascertain what course of action is most appropriate in the circumstances.
Many times, I have seen a taxpayer either not understand that audit letters have been received or have ignored audit letters that have been received. Examination has sent a taxpayer an initial audit letter, a report, a 30-day letter, and finally a Statutory Notice of Deficiency. At this point, the tax has been assessed and Collection starts sending letters and talking about seizing assets or levying wages. What to do?
If you have ignored all the audit letters purposely, or by misunderstanding, or even due to fear of responding to the IRS, and now find yourself in a jam with Collection and believe the amount of additional tax assessed is incorrect, an audit reconsideration can be requested. However, at this point, the IRS’ patience has worn thin, so you had better have your ducks in row when your representative presents your case. I have experience on both sides of the table in this kind of situation and can help, but I need honesty, as does the IRS, from the prospective client.
If you have ignored all audit letters, have had additional taxes assessed, have realized the IRS has assessed incorrect tax, and are now receiving Collection letters, you need to determine whether you can pay the tax due. If you have the ability to pay the tax, you can simply pay the amount due, or set up a payment plan. In the event you can pay, whether you pay the tax immediately or through a payment plan depends on your situation. For instance, if you have the cash on hand, paying the tax in one payment will reduce the amount of interest accruing on the amount due. However, if you do not have the cash on hand but can pay over time, or by selling assets, a payment plan may be the more appropriate route. We can discuss options, and I can help you set up a payment plan with the IRS if that is the more appropriate course of action.
In some instances, a person’s financial situation changes after tax has been assessed. Sometimes financial situations change even after a payment plan has been entered with the IRS. For instance, a person may have lost a job, gone bankrupt, or simply gotten ill and cannot work. If there are no assets to sell and the expected income will not be enough to provide for living expenses as well as pay the complete tax due, an Offer-in-Compromise may be appropriate. In this situation, a taxpayer should seek assistance from an experienced tax professional to prepare a financial statement and submit a request to reduce the tax due to an amount the taxpayer can pay.
If any of these situations apply to you, contact me, and I will be happy to review your information and see how I can help you end your IRS woes. You want to get off their radar before year after year of returns become subject to audit.
Read Part 1 - Experience Intro
Read Part 2 - Examination Letters
Read Part 3 - Examinations of Income
Read Part 4 - Examinations of Expense
Part 5 - Collection Letters