Here are the steps to follow when a taxpayer gets an IRS notice or has an IRS enforcement issue.
#1: Understand the notice and determine if action is needed. If you are confused by the notice, skip to step #3 and #4. Some notices are informational in nature (i.e. confirming a payment, requesting added time to process a return, etc.). Others indicate a tax problem or issue that needs to be resolved.
#2: If the notice is related to a tax problem(s), noncompliance issue, or IRS enforcement, familiarize yourself with the process and options to resolve the issue. Review the steps to resolve the major IRS enforcement issues:
Tax debt and IRS collection solutions (link to pillar page)
IRS audits (link to pillar page)
CP2000 Underreporter inquiries (link to pillar page)
IRS penalties and penalty relief (link to pillar page)
Unfiled past-due returns (link to pillar page)
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#3: Consider engaging a qualified tax professional. In many cases you can get better results in less time by engaging a tax pro who is experienced in resolving tax problems. Tax pros can you better understand the options that are best for your situation. They also have special hotlines and online tools to better navigate the IRS. Also, they will know your rights and protect them if the IRS does not follow the rules properly.
#4: Get all the facts – both from your perspective and the IRS’ perspective. Good tax problem solving starts with good due diligence. If the notice and your dispute with the IRS is clear, you need to next get your information from the IRS. For example, if you are under an office or field audit, it is best to get your wage and income information from the IRS to make sure that you have reported all the income that the IRS has for you. That is an early step in an audit that you will need to be prepared for to understand the IRS’ questions in the audit. Another example: if you are seeking penalty abatement, it is best to research your account to understand if you qualify for first-time abatement or if you need to seek reasonable cause.
#5: Develop a plan to resolve. You may have multiple problems and urgent enforcement actions or deadlines. You will need to develop a plan of action – and follow through on each step. For example, if you have unfiled returns, tax debt, and penalties, you may want your plan to look like this:
Request collection hold to file returns.
Change withholding and/or make estimated tax payments to make sure you do not owe on future filed returns.
Obtain IRS wage and income information and account transcripts to file accurate back returns that pass IRS screening procedures for acceptance.
File prior year returns and monitor for acceptance. Request additional collection holds while the IRS processes the returns in order to avoid collection enforcement actions (liens, levies, passport restrictions).
Get final balance owed and determine correct collection alternative (extension to pay, installment agreement, currently not collectible status, or an offer in compromise)
Execute the collection option selected and get it accepted by the IRS.
Determine if you qualify for penalty relief and request appropriate relief. Be prepared to follow through on appealing any adverse penalty determination.
Put procedures in place to remain in compliance in the future – hire a tax professional, arrange for installment agreement to be paid by direct debit to avoid missed payments, make adjustments as needed to withholding/estimated tax payments.
Monitor IRS notices for any changes in compliance status.
#6: Execute your plan. Complete the steps – and make any adjustments based on new findings. Make sure to monitor progress with the IRS and request enforcement relief as needed.
#7: If needed, appeal any disagreements. Understand your appeal rights if you have a disagreement with the IRS at any point in the resolution process. If needed, timely request an appeal. Be clear in your appeals request with the items of disagreement and the outcome you are requesting.
#8: Finalize agreements. Check and make sure that the agreement reached is processed by the IRS. Also, complete any paperwork needed to finalize the agreement. For example, if you agreed to an audit adjustment, you need to review the agreed adjustments before signing any agreement with the IRS.
#9: Stay in compliance to avoid future issues. Complete the terms of any agreement and monitor future notices for any compliance issues.
Seeking professional help when handling back taxes can help you avoid the discussed errors. At Advance Tax Relief, we offer specialized tax resolution services to help you deal with IRS debt.
Our experts can help rectify erroneous tax bills and guide you in picking a suitable repayment program. Contact us today (713)300-3965 for back tax filing and tax relief services.
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