Tax Reduction, Tax Debt Relief, and More: How We Can Help

June 23, 2023
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Are you struggling with delinquent taxes and in need of tax debt relief? Is the amount of prior year taxes owed enough that you have received a notice from the IRS? Are you being audited by the IRS? Are you facing current IRS penalties and owed interest? If so, you may need the help of an expert for tax debt relief and working through issues with the IRS.

Here are a few of the common questions we see when it comes to IRS controversy and tax debt relief.

What if you received an IRS notice related to prior year taxes owed?

  • Pay the amount due in full.
  • Request an installment agreement (over 72 months, balances due under $250,000) if you cannot pay in full.
  • Disclose your financial information to determine your ability (or inability) to pay the taxes if you cannot pay in full (over 72 months). For individuals with balances over $250,000, your financial information is required even if you can pay within 72 months.

Who can I trust to advise me on delinquent taxes owed?

A common issue faced by taxpayers dealing with delinquent taxes is being unsure of who to trust.

Many people end up turning to the one person they do trust regarding taxes: their accountant. This is especially true if a long-standing and close relationship with their CPA has already been established. Your CPA, paired with our IRS Tax Controversy and Procedure Team, can be a powerful combination when you are dealing with a delinquent tax problem.

Pairing your CPA with a team of professionals that specialize in IRS Dispute Resolution and Collections work will help:

  1. Ensure optimal results. An experienced team can get the right payment plan established. A good team can also mean the difference between an accepted settlement agreement or one that is rejected.
  2. Meet collections deadlines. There is limited time provided by the IRS in collections due process matters. When those deadlines are disregarded, the IRS moves forward with their collection process, resulting in levies and other collection measures. An experienced team knows how to manage the collection deadlines.
  3. Negotiate your case. An IRS collections agent’s job is to collect money as quickly and efficiently as possible. Therefore, they appreciate (and you benefit from) working with an experienced team who knows IRS rules and can negotiate them on your behalf.
  4. Reduce the cost. Working with an experienced team provides a timelier resolution. The sooner a case gets resolved, the less it will cost you.

What should I do if I made a tax payment but receive a balance due notification?

The IRS suggests the following:

  • If you made a payment to the IRS, allow time for the payments to be input and processed. When that happens, a revised tax notice will be issued.
  • Do not place a stop payment on the tax payment check. That will only serve to bring the potential of interest and penalties into play since the check could not be processed.
  • Checks received by the IRS will be posted to a taxpayer’s account based on the “Mailbox Rule.”  The Mailbox Rule basically says that a return, a claim for refund, a payment due, etc. is considered timely filed or paid if deposited into the hands of the U.S. Postal System in an envelope (or other acceptable packaging), properly addressed with the required postage paid, and the date of post mark falls on or before the due date of the item being submitted. If all this is properly done, the postmark date is deemed the date of delivery or payment. Returns, or payments, filed outside the United States or utilizing a designated private delivery service can also make use of the Mailbox Rule.

What if I receive an IRS notice that my tax return was selected for examination?

It is highly recommended that if your tax return is under IRS examination, you should gather the necessary documentation to substantiate your income and deductions and seek representation.    If your income was underreported by 25%, the IRS can expand the scope of the examination from one tax year to three tax years, and if they discover fraud, the IRS can examinate six years of returns.

What are potential IRS audit risk areas?

Without proper due diligence, business owners can find themselves in sticky situations. Compliance is important in every aspect of business, but it’s especially important to pay attention to the current issues that the IRS has in focus.

The items below provide a checklist to help identify whether you, or your business, might be at risk for one—or more—of the IRS’ high probability audit situations for this year.

  • Do you make charitable gifts through a donor-advised fund or conservation easement?
    IP monetization/royalty transactions, easements, and donor-advised fund transactions are under high IRS scrutiny.

  • Are you planning to change your compensation structure in light of tax law changes?
    The IRS’ position for reasonable compensation is reasonable replacement, which can complicate changes to wages, guaranteed partner payments, or compensation from S corporations.

  • Do you have a transfer pricing policy in place, foreign assets, or operations?
    International transactions are of special interest to the IRS. Returns not filed properly are subject to significant penalties, but requesting penalty relief and filing unfiled returns can alleviate potential penalties.

  • Do you have a captive insurance company?
    Recent U.S. Tax Court cases have emboldened IRS auditors to treat all 831(b) captives as shams.

  • Do you have more than $10 million in assets?
    High net worth individuals are easy targets for an IRS audit and probably will be audited.

  • Do you have a self-directed IRA?
    The IRS is examining SDIRAs to determine if they have violated the unrelated business income tax rules.

  • Have you recently completed a business or asset valuation or a study?
    The IRS will scrutinize the values determined in transactions or require a contemporaneous study.

The Benefit of Working with an IRS Controversy Team

While there are tax relief programs in play, working with the IRS can get complicated quickly. Working alongside a trained tax controversy professional can give you the tax relief help you need.

Here’s how we reduced one client’s tax debt from $1.7 million to $49,728.

When Bill’s business started to struggle, he had hard decisions to make—like whether he should pay the IRS or pay his employees and his operating expenses. What Bill didn’t know when he shut the doors to his business and headed into retirement is that a tax liability can almost double with penalties and interest over the course of ten years. And that’s how Bill, at 70 years old with ailing health and living on social security, found himself owing the IRS $1.7 million.

When the IRS started garnishing Bill’s income, he wasn’t able to pay his bills and medical expenses each month. The IRS demanded that Bill liquidate his assets, but Bill didn’t have the assets to satisfy a debt of $1.7 million.

Bill hired another CPA to try to resolve the debt with two offers-in-compromise, but the IRS still wanted $400,000 to settle the debt, and that was $400,000 more than Bill had to offer.

When Bill came to the Eide Bailly IRS Tax Controversy and Procedure team, he was wary that we would be able to find a workable solution. Within nine months, we were able to stop the IRS’s demands for liquidation of assets, end the garnishment on his Social Security Income, and negotiate a Partial Payment Installment Agreement of $592 per month.

Instead of paying $400,000, Bill will only pay $49,728 of his $1.7 million liability.

Here's How We Did It:

  1. A comprehensive financial analysis of Bill’s assets, equity, income, and expenses to determine his ability or inability to pay delinquent taxes.
  2. Presenting Bill with his payment options and choosing the best course of action to resolve the debt. In Bill’s case, the best option was to submit an offer in compromise.
  3. Advocating and negotiating with the IRS on Bill’s behalf until the IRS accepted Bill’s offer to settle his debt.
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