Evaluating Your Tax Debt Resolution Options

When it comes to resolving your tax debt, you have a number of possible routes you could take. In this article, I’ll go into some of the pros and cons of each option so that you have the information you need to make the best decision for yourself.

Do It Yourself Tax Resolution

Probably the route most people take, doing it yourself seems like the obvious or only choice for most people and small businesses. Simple tax debt problems that only cover a year or two, especially cases where the tax debt is under $10,000 (or under $50,000 if it’s only income taxes) are fairly easy to resolve with only a few phone calls (one phone call, in some cases).

If you can follow written instructions, are good with forms and paperwork, and have your personal financial paperwork in good order, then representing yourself is neither difficult nor time consuming. You need to be able to read and understand IRS notices and publications and forms, and keep good financial records for yourself.

Here’s a quick test: If you file your own tax return every year and have no problem doing so, then you can probably represent yourself if you have an income tax issue. If you struggle with doing your tax return, even if you use step-by-step software, then you might want to consider getting help with the situation, as well as if you have tax debts other than personal … Read the rest

Evaluating Your Tax Debt Relief Options

When it comes to resolving your tax debt, you have a number of possible routes you could take. In this article, I’ll go into some of the pros and cons of each option so that you have the information you need to make the best decision for yourself.

Do It Yourself Tax Resolution

Probably the route most people take, doing it yourself seems like the obvious or only choice for most people and small businesses. Simple tax debt problems that only cover a year or two, especially cases where the tax debt is under $10,000 (or under $50,000 if it’s only income taxes) are fairly easy to resolve with only a few phone calls (one phone call, in some cases).

If you can follow written instructions, are good with forms and paperwork, and have your personal financial paperwork in good order, then representing yourself is neither difficult nor time consuming. You need to be able to read and understand IRS notices and publications and forms, and keep good financial records for yourself.

Here’s a quick test: If you file your own tax return every year and have no problem doing so, then you can probably represent yourself. If you struggle with doing your tax return, even if you use step-by-step software, then you might want to consider getting help with the situation. If you have tax debts other than personal income tax liabilities, you should also hire a licensed tax … Read the rest

Unfiled Tax Returns

Do you have past due tax returns? If so, you’re not alone. While the IRS does not publish statistics on this, nor are they really able to track this number, but my own research and statistical analysis (because I’m a numbers geek and do stuff like that), estimates that there are between 5 and 8 million outstanding personal income tax returns in the United States for the past three years alone.

If you owe a tax debt to the government and are seeking to get that situation resolved, you will first need to file any missing returns. The IRS will NOT negotiate a payment plan or a reduced settlement if you have past due tax returns. The reason for this is pretty simple: If you don’t file the returns, they don’t know how much you really owe.

While any tax preparer, CPA, or Enrolled Agent can probably assist you with filing your past due tax returns, it is important to note that many of these tax preparers focus their practices solely on current year tax return filings. Since the tax laws change literally every year, it’s a daunting task just to keep up with the tax code for the current year, so many tax preparers don’t bother trying to keep up with prior year tax matters.

A firm that specializes in taxpayer representation, on the other hand, often does exactly the opposite. Many of these firms don’t even offer current … Read the rest

IRS Penalty Abatement Reasonable Cause Criteria

One of the most common questions we are asked has to do with the reduction of interest and penalties on IRS accounts. Any reader of this blog knows that I am adamant about correcting the myths, lies, and half-truths perpetuated by tax resolution salespeople, and the IRS penalty abatement is one of the things least understood and grossly oversold by unlicensed salespeople at large, national tax resolution companies.

First of all, let’s get this out of the way: There is no reasonable cause interest abatement application process within the IRS. It simply doesn’t exist, period. If somebody is telling you they can get your interest reduced, you’re straight up being lied to, and you should seek assistance elsewhere.

There are two, and precisely two, instances in which interest is reduced:

  1. Any IRS employee gives you false information, which you acted on and resulted in the interest. This is one reason why all IRS correspondence should be conducted and follow up in writing.
  2. Since interest is calculated based on the tax liability, if an amended return is filed and the tax itself is lowered, then the interest is also reduced.

Now, on to penalties. The IRS charges dozens of different types of penalties, but the three that we most commonly talk about are the late filing penalty, the late payment penalty, and the penalty for not making Federal Tax Deposits. These three penalties combined can add a whopping 65% to your … Read the rest