What do I do with a tax notice?
Well, the first thing you don’t do is you don’t ignore it. You don’t throw it away, and you don’t put it on the bottom of your pile. The most important thing you can do with the tax notice is address it, and either pay the amount owed or if you have a question as to how or why you’re being assessed, bring it to the attention of a licensed tax professional. That licensed tax professional can be your Cpa an enrolled agent or a tax attorney.
What is an audit?
An audit by the internal revenue service is nothing more than a test of the accuracy of the tax return that you filed. It is not a punishment, it is not retribution, it is not revenge, it’s merely a test. If you pass the test, they don’t ask you for more money. If, however, elements of your tax return cannot be verified with reasonable certainty. On that test, you may generate additional tax interest and penalties. If you can show more deductions than you claimed on your tax return, and the IRS agent agrees with you, you actually may be entitled to an additional refund.
What is an offer in compromise?
An offer and compromise is a formal request to negotiate the tax interest and the tax penalties that are associated with a tax year that is not been fully paid for and closed. It requires you to disclose information to the internal revenue service about your expenses, your assets, liabilities, state tax, and return statuses, among other varied things, including cryptocurrency.
What are the reasons for an offer in compromise?
The Internal Revenue Code Congress has permitted 3 separate and distinct reasons to grant an offering compromise. The first reason is doubt as to liability. You are saying that you do not owe the tax and therefore not responsible for the interest or the penalties that are assessed for not paying that tax. The second reason for an offer in compromise is doubt as to collectability. A doubt as to collectability offering compromise can best be summed up by saying, “I owe X”, but all of my assets and income for a reasonable period of time is way less than X. Therefore, will you take way less than X. Spread out over a period of time. The third and final reason for offering compromise is effective tax administration. Effective tax administration is the Hail Mary Pass of tax controversy in an effective tax administration. You are pleading with the IRS that you only have X of assets and potential future income, and you will get no more and that if they took it and applied it to your tax, it would leave you destitute. It is a very hard standard to meet, and should not be relied on a general basis. But it is the third and last basis for an offering compromise.
What do you do if you are denied an offer in compromise?
If you are denied an offer in compromise, you have two choices to make. One path is the path of appeal. The other path is a path by which you seek an installment agreement to pay off your debt in fault. If you choose to enter into a payment plan, you will protect yourself from further collections actions. You can negotiate the payment plan, and you can stretch out the payment plan until such time as your taxes are paid in full. The caveat is, you must maintain the current status of your tax obligations. This means you must have money, and take it out of your paycheck. Or if you make quarterly payments, you must make quarterly payments. The other alternative is to appeal the denial of the offering compromise to the office of independence and appeals. This will further the length of the time until your tax resolution but might result in you being granted your original offering compromise.
What is an installment agreement?
An installment agreement is an agreement between you, the taxpayer, and the internal revenue service by which you agree to discharge your tax debt and pay the interest in penalties over a period of time to qualify and maintain an installment agreement. You must maintain your current status with your tax obligations, you must continue to have taxes withheld, you must file timely, and you must pay any amounts owed on your tax return in a timely matter. You may also be required to make quarterly payments.