Each year the Internal Revenue Service (IRS) has the responsibility of collecting federal taxes from millions of Americans and making sure people follow tax laws. The IRS handles the processing of tax returns, collection of tax payments, and the distribution of tax refunds. In 2018, the agency collected around 250 million tax returns and distributed tax refunds worth nearly $400 billion.
Many taxpayers only think about the IRS during tax season while waiting to get their tax refund. However, the IRS is working year-round. If the agency believes an individual or business hasn’t reported enough income, has underpaid, or didn’t file a return when they should have, the IRS can and often does take action. When that happens, a person or company might need tax resolution services to help solve the issue, pay back taxes or get tax relief.
Tax resolution services are best carried out by a certified tax resolution specialist or tax professionals. Working with a reputable tax resolution firm gives you the best chance at settling your tax problems and moving on from tax debt with minimal headache.
In this tax resolutions guide, you’ll learn about the different tax problems and tax issues certified tax resolution specialists help people with, how to choose the best tax professional, and how to say goodbye to your tax problem for good.
What Is Tax Resolution?
Tax resolution is the process of working with the IRS and tax problem solvers like tax resolution firms to find a solution to your tax problems. The IRS might have an issue with your tax return or tax situation for a few reasons. If you have a complicated tax return, for example, the IRS might audit you to verify you are reporting the appropriate amount of income and claiming legitimate deductions. The IRS may believe you have underreported your income and might want to take a closer look at your tax situation.
Another example of a problem can be when you don’t file your taxes for several years. Eventually, the issue can be serious enough that you need outside help to get you back on track and to avoid being charged more than you owe by the IRS, reduce tax penalties, and avoid a tax levy, and tax liens. Whatever your tax issue, working with a tax resolution professional or tax attorneys gives you the best chance of taking care of your tax liability.
When Do You Need Tax Resolution Services?
There are a number of different circumstances you can find yourself in where you’ll benefit from working with a tax resolution specialist.
Audit Representation
If you receive a notice from the IRS that you are going to be audited, you don’t need to panic. Although the audit process can seem intimidating, it’s not something you need to go through on your own.
The IRS audits taxpayers for a range of reasons, and just because the IRS decides to audit you doesn’t mean you have done anything wrong. Hiring a professional tax resolution firm to help put together an audit defense for you can help you rest assured that the results of the audit will be as accurate and fair as possible.
Paying Back Taxes
If you owe back taxes, you might not be able to pay the taxes owed in one lump sum. Part of tax resolution involves evaluating your returns to make sure you are responsible for the unpaid taxes you’re being charged. If the bill is accurate, your tax resolution specialist will work with the IRS to put together a plan that makes paying the tax you owe more manageable. Once you’re on a plan with the IRS you’re considered to be in good standing and the IRS penalties and collection enforcement efforts will cease.
Non-Collectible Debt
What if the amount you owe to the IRS is so much you can’t repay it and still pay for your everyday living expenses? In such a terrible situation, you don’t have to choose between a roof over your head or paying the IRS.
The IRS offers a form of financial hardship relief when you can’t pay your tax debt. It’s called “Currently Not Collectible” status, and if you qualify, the IRS won’t try to collect the debt you owe until your circumstances change. Working with tax professionals and using tax resolution services can help you see if you qualify for non-collectible status and ensure you understand the pros and cons of using it.
Transcript Protest
Considering the IRS deals with hundreds of millions of taxpayers each year it would be amazing if they never made a mistake. The IRS makes mistakes. Sometimes, they think you made more money than you did, or they include the income from an ex-spouse or a former business partner with your income. When the IRS makes a mistake, you have the right to protest the IRS and present evidence that supports your case. Tax professionals can help you put together a transcript protest, so you can avoid paying money you don’t owe.
Tax Penalties
The IRS will charge interest and tax penalties when individuals or businesses pay their taxes late or don’t pay at all. This is pretty much guaranteed. Fortunately, there are some instances when the IRS will waive penalties. Certified tax resolution specialists can help you determine if you’re eligible for tax penalty abatement and help you through the process of deciding whether or not you qualify for the penalty waiver.
Unfiled Tax Returns
The IRS expects you to file a tax return each year, but in some instances, life and other circumstances can prevent you from filing. When that happens, the IRS might guess at how much you owe based on the documents it’s received, such as Forms W-2 and 1099. A tax resolution specialist can help you prepare unfiled tax returns from past years. It can also help you file present-day returns and work with you to put together a tax plan for the future so you never fall behind again.
Offer in Compromise
There are cases when the IRS is open to compromising with taxpayers. If you owe a substantial amount and aren’t able to pay it, the IRS’ offer in compromise program might accept a payment that is less than what you owe.
Compromising with the IRS can be a challenge, as the agency usually doesn’t take requests for reduced payments. Working with a tax resolution specialist will dramatically increase your chances of getting an offer in compromise approved.
Tax Liens
A tax lien is a claim against a property you own, such as your home. If you have trouble paying your property taxes, federal taxes, or state taxes, the IRS may put a lien on your home or other valuable property.
To help you avoid foreclosure and other complications, any liens on a property must be adequately removed and discharged. A tax attorney or other tax resolution expert can help protect your property from liens as well as confirm that any liens have been appropriately discharged or withdrawn.
Wage Garnishment
When the IRS is owed money, it can go to great lengths to get it. One of the most aggressive and common ways it collects tax debt is to garnish your wages. Wage garnishment makes your paycheck smaller or non-existent. Part of tax resolution services involves negotiating with the IRS before it begins garnishing your income.
A tax professional can help you put together a payment agreement plan to present to the IRS, to show them you can pay without them taking the money directly from your employer.
The sooner your tax issue is resolved, the better. Getting professional help for tax resolution can mean less headache and stress for you and mean you don’t pay more than you need to the IRS.
Installment Agreements
The IRS offers payment plans called installment agreements that allow you to pay your back taxes within an extended time frame. You can apply for a short-term payment plan, which gives you 180 days to pay the amount you owe. If you prefer to spread out your payment, you can apply for a long-term payment plan — also known as an installment agreement. A long-term plan allows you to pay the amount owed in monthly installments.
How Does Tax Relief Work?
The IRS is more sympathetic and understanding than most people think. The tax agency has introduced several programs over the years designed to provide tax relief to qualified individuals and businesses.
One program is known as “Fresh Start.” The IRS created the program in 2011 to help people and businesses that were struggling to pay their taxes. The initiative made changes in three areas:
Offer in Compromise
The Fresh Start Program also expanded the Offer in Compromise program, allowing more people to become eligible for it. An Offer in Compromise lets you settle with the IRS and pay less than the amount you owe under certain circumstances. Under Fresh Start, taxpayers with incomes up to $100,000 and tax liability up to $50,000 may be eligible for an Offer in Compromise.
Liens
As part of Fresh Start, the IRS raised the threshold amount for liens. They also made it easier to withdraw liens after taxes are paid and allowed them to be withdrawn once a taxpayer creates a direct deposit payment agreement.
Installment agreements
Fresh Start made it easier for taxpayers to create an installment agreement to pay back tax debt. The process of applying for an agreement is simplified for people who owe less than $50,000, as they can now apply online and no longer need to fill out certain forms. The program also extended the repayment term from five years to six.
Why Choose Tax Resolution Services?
Although you do have the option of working through your tax issues on your own, it’s in your best interest to work with tax professionals who can help you work with the IRS and resolve your problem.
Every taxpayer has certain rights, which are outlined in the IRS’ Taxpayer Bill of Rights. You have the right to:
- Be informed
- Receive quality service
- Pay no more than you owe
- Challenge the IRS and be heard
- Finality
- Privacy
- Appeal the decision of the IRS
- Retain representation
- Confidentiality
- A tax system that is fair and just
Working with a company that provides tax resolution services helps you ensure your rights are protected. A tax resolution firm can help in a number of ways:
1. Evaluate Your Situation
Step one when working with a tax resolution firm is to schedule a consultation. During the meeting, you’ll have the chance to explain your particular issue, and a tax professional will have the opportunity to review your paperwork and assess your situation.
The consultation can help you see if you’d benefit from the services offered by a tax resolution firm. It also gives the tax consultant the chance to get to know your situation more in-depth and to start the process of coming up with a solution to your problem.
2. Design A Plan
The next step is to create a plan to help you work with the IRS and come to an agreement that satisfies everyone. If you’re being audited, your tax specialist will go through your documents to get a thorough understanding of your situation before preparing a defense for you.
In the case of negotiating with the IRS or avoiding wage garnishment, your tax resolution expert can put together a repayment plan that demonstrates to the IRS that you can pay — or can’t pay, in some cases. Your plan and defense can keep you from being overwhelmed by a substantial tax bill.
3. Communicate on Your Behalf
The Taxpayer Bill of Rights grants you the right to representation. Your tax resolution expert can be the go-between or mediator between you and the IRS. Working with a tax resolution firm means you never have to worry about dealing with the IRS on your own. Having a professional represent you reduces your stress and increases the likelihood of an outcome in your favor.
