Problem is common to every person, and solving it must be the response. The IRS is extremely complex and it is no surprise that so many people run into tax problems each year. There are many different problems that taxpayers run into for various different reasons. Like any other problem, taxes such as unpaid taxes, tax lien, tax levy, wage garnishment, IRS notices, tax audits, and unfilled returns can cause stress and we have to deal with it in a similar manner.
Yes, having a problem is normal and there’s always a solution. As a result, they have created methods to make things easier on individuals in resolving the issues as long as they are upfront about their problem and willing to make the appropriate tax filings to correct the situation. Ignoring the problem and taking no actions to it, is the worst thing you can commit. The following steps should be taken if faced with this kind of problem
Step 1: Contact the IRS
When you receive a notice of any outstanding tax obligations or penalties, it’s important to contact the IRS and to address the issue immediately. You can speak to a revenue officer who is willing to work with you depending on your circumstances. The revenue officer will tell you what certain financial information to be submitted to show your ability to pay and then discuss or negotiate a collection alternative.”
If back taxes are owed, you need to do any permissible action to bring the current year up to date before reaching out.
Step 2: Know Your Payment Program Options
The taxpayer must inquire with IRS about their eligibility to participate in the IRS’ offer in compromise program and be prepared to back up claims of financial hardships with documents and bank statements, if you are unable to pay off taxes, penalties, and fees in full. Depending on their circumstances, taxpayers may also be eligible for the installment payment program.
Tax issues with IRS take months to resolve and it is agonizing, below are some of the alternatives for resolving the IRS collection activity:
Tax Payment Options
A taxpayer is supposed to make a monthly payment of his liabilities but ends up paying the less amount but there are different payment options you can select if you cannot pay in full or on time. Once an agreement is set up, IRS considers you in good standing on your taxes even though you have not been paid it off yet. If not set up, then additional penalties will be charged for not having some sort of agreement setup.
Offer in Compromise
If taxpayer financial ill or in a very poor situation and he may never be able to pay off the taxes owed, then he may be able to qualify for an offer in compromise in which you will be able to settle the taxes owed for less than the total amount owed. This is a difficult tax filing to obtain but it is available to those taxpayers whose situation are so bad that it would be unfair to hold them liable for the total amount they owe.
IRS use penalties as a mechanism to scare taxpayers to comply with the law requirements. But IRS created penalty abatement, for they know that there are legitimate circumstances a taxpayer should not be held liable. If you feel you should not be held liable for the penalties buy you were charged on taxes owed or penalties for unfilled taxes, it is possible to get these penalties removed.
Innocent Spouse Relief
When spouses decide to file a tax return jointly, if one of them has tax liability then both are held to be liable. However, the innocent spouse can file for a tax relief so that tax liability can be placed entirely on one of the spouses or can be separated so both individuals are not jointly responsible for the entire amount. This form of tax relief only applies to those taxpayers that have filed joint tax returns in which they have a tax amount owed and they feel the amount owed should be the responsibility of the other spouse.
There are times that it would be unfair to collect the taxes owed at a certain point in time because it would create an unfair financial hardship on the taxpayer. IRS will declare taxpayers currently not collectible for a period of time until their financial situation improves enough for them to pay their taxes.
Step 3: If Doubtful, Hire an Accredited Professional
Some tax matters are complicated that it’s best to work with an accredited professional.
If the taxes owed is a very small amount and you can pay it off for short period of time, it is best to get to a reputable accountant, tax attorney, specialist, enrolled agent with experience who will explain to you the process and the facts you can deal with. It’s in taxpayers’ best interest to be honest and upfront about their situation and provide the professional handling their case with as many documents as possible to increase their chances of reaching an agreement with the IRS.
For instance, you took some deductions that you thought were legitimate and honest. You can discuss things with IRS about the amounts of the deductions and present your evidence such as the third party’s mortgage interest, property taxes, and charitable donations. Make sure your paperwork is in order, you bring all of the documents to the professional and have a dialogue up front.