If you are like millions of other Americans, you have had to deal with an IRS matter once in your life. If that is the case you may have asked the question: How do I get the feared IRS off my back? The answer is not a simple one and is different for every taxpayer. Below is some helpful information to get you started in understanding mitigating a tax controversy.
Statute of limitation
This portion of tax resolution is an important one. While examining your IRS “secret file”, you must keep dates and amounts in the forefront of your mind. It is critical that you make the correct moves at the correct times. Don’t let the IRS or State trick you into making “voluntary payments” on a debt that may be getting ready to expire. The Statute of limitations of Collection Statute Expiration Date (CSED) can be a great trick to use when reducing your overall tax debt. You also have to weigh the options of filing or not filing when reviewing your transcripts. We have been told that IRS is mostly concentrating on the last six years so you may want to start with those. Research your individual state’s CSED limitations and also actions that may suspend or stop the CSED. This is something you can’t afford to mess-up!
What about a deal with the IRS?
I’m sure you have all heard of settle for less with the IRS or settle for pennies on the dollar. You may be able to settle your case for less but this is not true for everyone. Taxpayers who qualify for this program are unable to live a normal life and pay off their IRS debt. If you are eligible for an offer or Offer in Compromise (OIC) make sure you research allowable expenses in your county. Nothing is worse than offering too much and realizing you could have offered a drastically lesser amount. In many cases the resolution is an extended payment plan. Make sure you get the best allowable terms in the code or you could end up with higher payments than you can afford.
Oh no, a big hit to my credit!!
If you have a old Maryland tax debt you may have heard of the company Penn Credit. No, this is not a scam. Penn Credit and other collection agencies have been outsourced to aide the State in collecting on delinquent accounts. If you have gotten relatively far in the collection stages it is possible that your debt has been reported to the credit bureaus. What can tax debt do to a credit report? The answer is a lot! A judgement on your credit can drastically reduce your score; it can alert future creditors that you have an outstanding liability. Potential employers can also see this on your credit report. Don’t ignore your IRS problem and let it get past the regular collection phase.
If you are facing an audit:
- Have an attorney research your case
- Request appropriate FOIA documents
- Gather all receipts and get organized
- Don’t meet on your own or at your place; have a common meeting place
If you owe back taxes and are unfiled for many years:
- Request your transcripts
- Research your statute of limitations
- Research your state’s statute of limitations
- File all necessary years and send to returns to the appropriate addresses
- Track your filings to make sure they post correctly
The best solution is to not owe in the first place.
- Make sure you are claiming the correct amount on your W4
- File on time
- Pay on time
- Keep good records
- Have an experienced tax professional prepare your returns
What is my solution?
In my opinion, the best move you can make, is to protect yourself from IRS threats and know your rights. Speak with a Tax Attorney and find out the options for your particular case. This is important because no one case is exactly the same. You are an individual; research your particular case and what alternatives are available to you.