Solve Your IRS Tax Problems

A tax notice, or tax letter, is a formal letter from a tax authority, like the IRS, sent to taxpayers. It can notify you of changes in your tax account, alert you to issues like underreported income or errors, or inform you about unpaid taxes. Sometimes, it may indicate your tax file has been chosen for an audit. Remember, getting a tax notice doesn't always mean you've done something wrong. It's important to respond quickly and accurately.

In the intricate world of taxes, there are numerous reasons why you might unexpectedly receive a tax notice from the IRS. One common reason for such a notification is a discrepancy between the information you've meticulously reported on your tax return and the data the IRS has on file. This discrepancy could be due to a simple clerical error or perhaps a miscalculation on your part that needs to be rectified. Another potential reason for receiving a tax notice might be that you are actually due a larger refund than you previously realized. Yes, you heard it right—sometimes the IRS informs you that they owe you money instead! On the flip side, the notice may also serve to inform you about unpaid taxes. This could happen if you inadvertently forgot a payment, or there might have been an issue with the transaction itself. Lastly, the IRS might send you a notice if they require additional information regarding your tax return. This need for clarification could arise from unclear filings, or they may simply be conducting a random audit for compliance purposes.

It's important to remember that receiving a tax notice isn't necessarily a cause for alarm or panic. Once you take the time to understand why the notice was sent, you can then take the appropriate steps to address it effectively. Don't hesitate to reach out for assistance from a qualified tax professional if you find yourself unsure of how to proceed. They deal with these types of notices on a daily basis and can provide you with the expert guidance you need during this potentially confusing time.

There are five main types of IRS notices:

Collections: You owe money to the IRS, and they want to be paid.

Audits: The IRS is reviewing your tax return more closely because something caught their attention.

Errors: The IRS found mistakes in your tax return that don't match their records.

Non-Filing: The IRS hasn't received your tax return and will let you know.

Other: This includes any other IRS letters that don’t fit the above types, like informing you about S-Corp acceptance or giving you an identity protection PIN.

The Internal Revenue Service offer in compromise program is a valuable privilege, not a guaranteed right, and only a limited number of taxpayers actually meet the necessary qualifications to take advantage of it.

An IRS offer in compromise (IRS OIC) allows taxpayers to settle their federal tax debt. The IRS can settle tax debts under 26 U.S.C. section 7122(a). The IRS aims to collect the most money quickly while minimizing costs to the government.

You must file all tax returns before submitting an IRS offer in compromise (OIC) for any reason, including doubts about payment or tax liability. If returns are missing, the IRS will reject your offer without review.

Make Sure You Are Fully Current on Your Estimated Tax Payments to Avoid Any Potential Penalties.

Most taxes, penalties, and interest can be settled with an IRS offer in compromise. This covers income taxes, payroll taxes, and various penalties for not paying, not filing, negligence, and fraud. You can also use this

Most taxes, penalties, and interest can be settled with an IRS offer in compromise. This covers income taxes, payroll taxes, and various penalties for not paying, not filing, negligence, and fraud. You can also use this offer to settle the Trust Fund Recovery Penalty, although you might need to wait some time.

To file an IRS offer in compromise, focus on the offer being based on doubt as to collectability. It's crucial that your offer meets or exceeds your reasonable collection potential for the IRS to settle the liability.

Reasonable collection potential is the amount of money the IRS expects to collect on taxes before the deadline. To determine this, the IRS provides national and local expense standards for things like food, housing, utilities, car payments, and car costs.

It seems like common sense, but taxpayers are often tempted to lie on their offer in compromise due to various reasons. This is a profoundly misguided and risky decision, as it can result in more than just serious tax problems down the line. Offers in compromise are signed under penalty of perjury, which means that providing false information can have severe legal consequences. Additionally, the IRS goes to great lengths to verify the information submitted on the offer. For instance, if you carelessly leave out a car or motorcycle from your declaration, the IRS may have access to DMV records and could easily discover the omission. This is certainly not a great way to begin the process of an offer in compromise.

An IRS payment plan lets taxpayers repay tax debt over time, acting like a loan from the government instead of a bank.

To qualify for an IRS payment plan, you must have filed all your tax returns. If not, you won't qualify. To qualify for an IRS installment agreement, you must be up to date on your taxes for the current year. If you earn a salary, your paycheck must have enough taxes withheld.

There is a fee associated with obtaining an installment agreement. This fee typically ranges from $43 to $225, depending on your specific income level and the method you choose for making your payments. Additionally, it is important to note that while your payment plan is pending and under consideration, the IRS is prohibited from issuing any levies against you. This means that you can use your bank accounts without the worry or fear that your funds will be seized during this time.

After your payment plan starts, the IRS won't try to collect from you. But, you must pay on time—missing a payment can lead to default.

The only IRS installment agreement guaranteed by law is the IRS guaranteed installment agreement. According to 26 U.S.C. section 6159(c), individuals—not businesses—can get these agreements if they meet specific requirements:

The tax owed (excluding penalties and interest) must be $10,000 or less.

You must have filed and paid all taxes on time for the past 5 years and have not had an installment agreement before.

If asked, you need to show financial statements proving you can't pay the full amount.

The agreement must allow for full payment within 3 years.

You must agree to follow all tax laws during those 3 years.

If you don't qualify for a guaranteed agreement, you can still apply for a streamlined agreement.

If you owe $50,000 or less, you may qualify for an IRS streamlined installment agreement. This amount includes your tax, penalties, and interest but not any additional penalties and interest. The benefit of streamlined agreements is that you don’t have to submit financial statements, saving you time and money. You must pay off the balance within 72 months or before the collection statute expires.

If the IRS hasn’t placed a lien on you, they won’t if you follow the agreement and pay through direct debit or payroll deduction. If a lien has been filed, it can be released by reducing your balance to $25,000 and agreeing to pay via direct debit or payroll deduction.

The IRS is testing streamlined processing for individual taxpayers owing $50,001 to $100,000. The payment term is 84 months, extending beyond the usual 72 months. If you opt for direct debit payments or payroll deductions, you can avoid providing financial details. High earners might qualify for this plan to reduce larger payments, though there's no guarantee against a lien, as the IRS evaluates each case individually.

If your business owes $25,000 or less in taxes, you can qualify for an in-business trust fund express installment agreement with a 24-month payment term and no need for financial statements. For debts over $25,000, make a lump sum payment to reduce your balance. The IRS may file a lien but is not required to. Qualifying also helps you avoid the Trust Fund Recovery Penalty.

There are, in fact, two distinct scenarios in which you will find it necessary to establish a negotiated IRS installment agreement: (1) if you owe a sum exceeding $100,000, or alternatively, (2) if you owe an amount less than $100,000 but find yourself unable to pay the outstanding balance within the stipulated required period.