Tax Resolution Strategies
Currently Not Collectible (CNC)
One of the ways to get out of paying off your tax debt is to be declared “currently not collectible.” The IRS can declare you as being currently not collectible after it reviews evidence that you have no ability to pay the tax you owe. As soon as the IRS determines that you cannot afford to pay any of your tax debt due to economic hardship and declares you currently not collectible, the IRS must immediately stop all collection activities including levies and garnishments.
While you are in the currently not collectible status, the 10-year statute of limitation on tax debt collection continues to run. If the IRS cannot collect the tax you owe within the 10-year statutory period, then your tax debt will expire and you’ll owe nothing to the IRS.
A taxpayer facing significant hardships or tax debt burdens should seek the advice of a tax professional specializing in resolving IRS tax debts.
If you don’t qualify for the IRS’ Offer In Compromise program, a payment plan may be the way to resolve your problem. This is an agreed settlement between the taxpayer and the IRS, based on National standards to determine what amount the taxpayer will be paying the IRS each month, but allowing the taxpayer to have the ability to afford food, housing, clothing, medical & transportation expenses. This is a complicated mathematical formula that has to be calculated. In most cases, the National standards do not have to be used for the first year. The actual expense of the taxpayer can be used and then they allow the taxpayer one year to come into compliance with the National standards. This is not something that the IRS will inform you of or assist you with. This is another reason why it is essential that you obtain professional assistance with this matter.
Payment Plans Based on Current Income
Most citizens do not realize that the IRS must consider your current income situation when they ask you for a payment plan. The automated collections group ACS COLLECTIONS at the IRS will not inform you of your rights. They will let you enter into a payment plan that they know you can never make.
Offer in Compromise (OIC)
The recently updated Fresh Start Program represents a significant improvement to the IRS’ previous Offer in Compromise program. If done correctly, you may be able to successfully settle your tax debt for significantly less than you owe. The chances of getting your tax debt forgiven are greatly improved with an experienced IRS professional by your side.
To request an abatement or reduction of IRS penalties, you’ll need to prepare a Form 843, called Claim for Refund and Request for Abatement and submit it to the IRS. The form requires that you indicate, among other things, the type of penalty that you’re asking to be abated by identifying the actual law for which the penalty applies.
Two examples of penalties laws which are often used are:
- Internal Revenue Code section 6651(a)(1) Failure to File Tax Return
- Internal Revenue Code section 6651(a)(2) Failure to Pay Tax when Due
The Form 843 also requires that you explain the reasons why you’re asking for the penalties to be abated. Those reasons include, but aren’t limited to the following examples:
- written or oral advice from the IRS,
- advice from a tax advisor,
- correction of an IRS error, and
- fire, casualty, natural disaster or other disturbance.
- Serious illness/death of taxpayer, spouse, close relatives
Some penalties can also be abated if you have a reasonable cause for not complying and can show that you exercised ordinary business care and prudence. To get an abatement of penalties due to reasonable cause, you must have an excuse or reason that indicates you had no control over the situation. For instance, you were unable to file your tax return timely because you were seriously ill.
We strongly recommend that you don’t attempt to request penalty abatement yourself. IRS’ penalty abatement review procedures are very strict. One wrong word or statement will be cause for automatic denial of your request.
The IRS threatens imposing heavy penalties as a deterrent for taxpayers who file tax returns late and pay taxes late. The IRS wants taxpayers to fear these huge penalties, much like the people who are financing a car purchase fear swift repossession, if they don’t make timely car payments.
Although you have a right to request abatement of penalties, it’s important to know that the IRS doesn’t easily agree to reduce or eliminate penalties against you.
Beware of inexperienced or unprofessional firms who promise you that they will definitely get your penalty abatement approved. No one can guarantee that the IRS will approve your request to abate penalties. Approval or denial is solely in the hands of the IRS, and their decision can take months.
However, if the IRS denies your request to abate penalties, you should know that you have a right to request that the IRS’ Appeals Division perform an administrative review of IRS’ decision. This process requires a separate request and meetings with an IRS Appeals employee. Because of our former IRS experience, including our work in the IRS’ Appeals Division, we can defend you in Appeals if the IRS does reject your request for penalty abatement.
We know the tax laws and use your personal circumstances to put together the best penalty abatement request possible. There are strict guidelines that must be followed when dealing with the IRS and filing penalty abatements. Filing an abatement request too early or late in the resolution process can result in its rejection. Mason Accounting & Tax Services has the experience that enables us to successfully get though the “mine field” known as the penalty abatement claim procedure.
Our staff is well educated on representing taxpayers’ when their returns are flagged for audits. When the IRS issues you the required notice (CP2000), they are proposing to make changes to your tax return that might increase or decrease your tax debt along with associated penalties/interest. Our staff also has many years of IRS experience and we know how the IRS thinks and how to best serve your interests.
No matter how simple the request for information may be, we never advise any taxpayer to represent themselves in an IRS audit. Even if you have been absolutely honest and filed everything correctly, meeting with the IRS can be an intimidating experience. The IRS auditor represents the IRS, and is looking to find errors on your return. Shouldn’t you have someone on your side to ensure that the IRS doesn’t take advantage of you?
IRS Agent and Auditors are trained investigators. Although they may appear friendly during the audit, don’t forget that their job is to find mistakes on your tax return and perhaps find unreported income. If an Agent or Auditor discovers that you failed to report a significant amount of your income on several years of tax returns, did you know that you could be faced with criminal prosecution?
Handling the audit on your own is a big mistake! For instance, do you know the “trick questions” an Agent or Auditor might ask you during the initial interview?
We highly recommend that you hire a tax professional to represent you before the IRS.