Category Archives for "Installment Agreements"

IRS Audits

Installment Agreements , Offer in Compromise , Uncategorized

What should you expect if you are under an IRS Tax Audit?


Opening the mail to find an IRS Audit notfication letter is never fun. IRS Audits can be handled effectively in various different manners. But now that you are looking at the IRS Audit notifcation in your hands here is what you need to know ...

An IRS audit is a review/examination of an organization's or individual's accounts and financial information to ensure information is being reported correctly, according to the tax laws, to verify that the amount of tax reported is accurate.

What is an IRS Audit?

Although IRS Tax Audits can be intimidating, proper representation can result in a favorable outcome. An IRS audit is a review/examination of an organization's or individual's accounts and financial information to ensure information is being reported correctly, according to the tax laws, to verify that  the amount of tax reported is accurate.

$ 12 Billion * Value of tax dollars in dispute in 2016

Last year the IRS audited approximately 1.2 million returns. These audits could have been very simple (single issue) examinations or the audits may have been extremely thorough and sifting - examining each and every part of the tax return filed by the taxpayer. 

In any case, receive a notice by the IRS of their intent to audit your return is the very first step in the audit process.

How did you get selected for an IRS Audit?

Selecting a return for audit does not always suggest that an error has been made. It is possible that an audit can result in no additional tax due to a taxpayer.  This is called a no change audit.  In addition. an audit can even result in a tax refund. This result are discussed in the audit determination section of this article.

Tax Returns to be reviewed by the IRS for examination are selected using a variety of methods, including:

  • Random selection and computer screening - sometimes returns are selected based solely on a statistical formula.
  • Document or Information matching - when payor records, such as Forms W-2 or Form 1099, don't match the information reported.
  • Related examinations - returns may be selected for audit when they involve issues or transactions with other taxpayers, such as business partners or investors, whose returns were selected for audit.
  • Participation in Tax Avoidance Schemes  - Some returns are selected based on efforts by the IRS to identify abusive tax avoidance schemes and strategies.

IRS Audit Selection Methods

Examples of transactions that could send up a red flag and trigger a potential IRS audit include:

  • the use / abuse of certain trusts
  • Limited Liability Companies (LLCs)
  • Limited Liability Partnerships (LLPs)
  • International Business Companies (IBCs)
  • foreign financial accounts
  • the use of offshore credit/debit cards

An overview of those types of schemes can be found here.

What are your Rights During an Audit?

In 2013 it was recommend that the IRS issue a Taxpayer Bill of rights so that all taxpayers would know what to expect when dealing with the IRS.  There has always been many claims by taxpayers large and small that alleged that the agency sometimes would abuse their power when dealing with taxapyers. These rights include:

Rights during and IRS Tax Audit

  • A right to professional and courteous treatment by IRS employees.
  • A right to privacy and confidentiality about tax matters.
  • A right to know why the IRS is asking for information, how the IRS will use it and what will happen if the requested information is not provided.
  • A right to representation, by oneself or an authorized representative.
  • A right to appeal disagreements, both within the IRS and before the courts.

Taxpayer Bill of Rights issued by the IRS

In addition to your rights under an audit, you also have additional rights that the IRS want you to know (as seen in this video above).

What are the possible outcomes of an IRS Audit?

An audit can be concluded in three ways:

  • No change: an audit in which you have substantiated all of the items being reviewed and results in no changes. If this happens the IRS will issue a "no change letter" inidcating that no additional taxes are due.
  • Agreed: an audit where the IRS proposed changes and the taxpayer understands and agrees with the changes. Agreement can be that some issues are won and some are lost during the audit review process.
  • Disagreed: an audit where the IRS has proposed changes and the taxpayer understands, but disagrees with the changes.

IRS Tax Audit Guide by the Agency

What Happens When You AGREE With the IRS Audit Findings?
  • If you agree with the audit findings, you will be asked to sign the examination report or a similar form depending upon the type of audit conducted.
  • If money is owed, there are several payment options available. You may choose to pay in full, or pay in installments.
What Happens When You DISAGREE with the IRS Audit Findings?
  • A conference with a manager may be requested for further review of the issue or issues.
  • In addition, Appeals Mediation Programs or an Appeal request may be filed.

Learn more about how to deal with IRS

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Free Report: Offer In Compromise

Offer in Compromise

Installment Agreements , Offer in Compromise

What is the Offer in Compromise Program?

Radio and Television commercials can be very misleading. Unfortunately everyone does not qualify for and Offer in Compromise. Sometimes providing  OIC Information to the IRS can reveal unnecessary details - that can be used against you.

The IRS may agree to settle a tax liability for less than the amount owed if they believe the liability cannot be paid in full or if there is doubt about the ability to collect the tax debt.

What is an Offer in Compromise?
Here is what you need to know before you file.

Driving in your car or watching television late at night -- you may have heard what may have sound like the answers to you prayers. "Settle your IRS Debt for Pennies on a dollar - all you have to do is just call".

If you think that late night commercials and televisions advertisement is confusing - wait until you search the internet for answers.

Google brings back close to 2.5 Million search results in the blink of an eye.

Many of these results are good. Some are bad. Some are just ads from companies that have sales people waiting for you to call.

Although there is nothing wrong with sale people or advertising for tax resolution services - as a consumer the IRS warns that you should perform due diligence  before you move forward.

Before you do you may want to determine how many people are actually denied when they file for an Offer in compromise. Here are the results as last reported by the IRS.

58 % OIC Denied in 2012
60 % OIC Denied in 2013
60 % OIC Denied in 2014
60 % OIC Denied in 2015

Instead of satisfying your IRS tax debt you are hit with a "Triple Whammy" of trouble:

  1. You have paid high fees with no real results,
  2. The IRS has more information that can be used to aggressively collect taxes,
  3. Your penalty and interest continues to grow at an astronomical rate
The Truth about the Offer in Compromise Program

Offer in Compromise

The IRS may agree to settle a tax liability for less than the amount owed if they believe the liability cannot be paid in full or if there is doubt about the collectabilty of the tax debt.

The truth is that everyone doesn't qualify for an Offer in Compromise.

Sometimes negotiating an affordable payment plan is your best option (although some companies earn substanially more fees by having you to file and Offer in Compromise).

Even worse, providing unnecessary information to the IRS under the Offer in compromise actually helps them to better understand your income and assets in the event they decide to take aggressive actions to collect taxes due.

Tax Tip                 

As a primer here is what the IRS has to say about the Offer in Compromise ....

The IRS, like most Federal Agencies, require that you speak with them in a manner that they understand. In this case the language of the agency is riddled with forms.   For example:

You will be speaking with this form

and likely with this form

And because the IRS Assumes that are taxpayers and homes are cookie cutter they have issued national standards to limit your expenses using this form:

Suggesting National Standards for expenses

Because all Homes are cookie cutter, right?

But if you are not in a cookie cutter situation and have things like legitimate medical expenses that exceed the Collection Financial Standards there are still options ….

An Offer in Compromise is generally the most difficult tax settlement option to obtain -- but it also provides the largest benefit to the taxpayer.

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What about Collection Activities?

Collection activities are generally halted while the offer is being considered. While the advertisement of many companies can be greatly exaggerated, the Offer in Compromise allows you to settle your tax debt for less than the full amount you owe - If you qualify. You should not file an Offer in Compromise if you do not qualify because now your complete and accurate financial information is now in the hands of the IRS.

The IRS considers your unique set of facts and circumstances including:

  • Your Ability to pay,
  • Your Income,
  • Your Expenses.
  • Your Assets / equity

The IRS will generally approve an offer in compromise when the amount offered represents the most they can expect to collect within a reasonable period of time.

What if my Offer in Compromise is rejected?

The Clock is ticking so what are my options?

The IRS willl issue a "30 day letter rejecting your Offer In compromise. Odds are you are going to have to provide more information during this period, request an appeal or take additional actions that may require a legal professional.  It is always best to confirm with a specialist before filing to determine if an Offer in Compromise is your best option in resolving your tax issues.

As a primer here is what the IRS has to say about the Appeals Process ....

Learn more about the Offer in Compromise program with free guide

IRS Installment Agreements

Installment Agreements

Understanding How IRS Installment Plans can tame your fear of Major IRS collection efforts and how you can get rid of the mail box blues forever

Just because you are unable to pay your tax obligation in full doesn't mean that you are out of luck and need to hide in fear the IRS.

After meeting with your tax preparer it seems that you are going to owe more taxes than you can afford to pay once you file. Like many people you filed your tax returns and immediately begun receiving automatic tax notices - all show additional penalty and interest -- growing with each notice.

Or even worse after your tax return was prepared and you realized that you could not pay the taxes owed you elected to not file the tax return - hoping to buy additional time to pay your taxes.

Unfortunately this places you in company with a lot of people who dread going to the mail box everyday wishing that another IRS notices is not waiting for them.

If you find yourself in the this state of "mail box blues", you will be happy to know that it doesn't have to be this way and that there is something that you can do to escape the mail box blues and gain piece of mind.

Pay in Full Installment Agreement – This is an agreement with the IRS to pay all outstanding taxes due by making monthly payments. Payment amounts are generally determined by a taxpayer’s ability to pay.

Partial Payment Installment Agreement – This is an agreement with the IRS to accept a partial payment for an outstanding tax liability. The amount is paid in monthly installments similar to a traditional Installment Agreement except that there is a reduction in the total amount owed.  

Acceptance of a Partial Payment Installment Agreement is based on a number of criteria including the taxpayer’s history of compliance together with their current income and available assets.

The criteria can be different based on many factors including the amount that you owe. 

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