About Tax Resolution Companies

There are many good tax advisors who help with tax problems. There are a few who have given those who help taxpayers with tax problems a bad reputation. There are a number of questions you can ask to help you get comfortable with the tax advisor. The primary question is who will actually be helping you? If you are hiring a tax resolution company, who is it that you are hiring? Who is going to be doing the work? Are you hiring the individual who answers the phone, their staff, or someone else? How many active or open cases does this person have? How long have they been doing this type of work and how long have they been with this company? What is their background? Have they worked for the IRS in the past? Do they have any special education or licensing–such as a law degree and license or accounting degree and CPA credential? How thorough is this person or firm when providing advice? Do they provide an explanation as to the amount of work involved and why their fee is the amount it is?
Generally, no. The avenues for resolving tax controversies are the same as they have been for a long time. With that said, the rules within these programs have changed and no doubt will continue to change. For example, the installment payment rules were changed not too long ago. This made it easier to qualify for more favorable installment agreements for some taxpayers.
We always recommend that you hire a licensed or credentialed tax professional. At a minimum, this ensures that they have invested some time and energy to be able to do this work and have something to lose. But even more importantly, their education and training will no doubt allow them to obtain better results. Most IRS tax problems are unique and a broader base of knowledge can and does help resolve them favorably. When it comes to the difference between hiring an attorney, CPA or enrolled agent, this is more difficult to answer. We have encountered tax advisors who we feel that they did the best they could with cases that have all of these designations. We have also encountered other advisors with these designations that we would not personally hire ourselves or allow our family members to hire. Our recommendation is typically that taxpayers hire an attorney if they feel that negotiation or difficult IRS agents will be involved in the matter or if litigation is likely. We sometimes recommend CPAs if there is a significant accounting aspect of the matter (such as book accounting entries) or more complicated tax return presentation issues (such as where items from the trial balance are reported on the Schedule M for larger businesses). We sometimes recommend enrolled agents–particularly for smaller individual cases–if there are significant recordkeeping deficiencies that must be overcome by compiling records, etc.

IRS Collections

The answer depends on exactly what type of notice you received. The IRS has a whole host of standard letters and notices that it sends out. Many of these notices have to be responded to quickly. Others do not. Here is a list of common IRS notices.
This depends on a number of factors. But generally, the remedy may depend on what tax year is involved, what type of tax, and how many years ago these taxes were assessed or paid. Very generally, it is often more difficult to go back and correct older tax debts. This is particularly true if the time for filing an amended return or refund claim has passed. There are still potential remedies that should be considered, however. There are even more potential remedies for correcting the amount of tax that was assessed when the tax year is sooner in time. There a few tax collections remedies which may also allow the taxpayer to dispute the amount of the liability, such as an offer in compromise based on doubt as to liability. These options should also be considered.
This depends. The IRS has a 10 year period to collect unpaid taxes (there are quite a few rules involved in this which we are skipping over). If it is close to the 10 year period, some taxpayers merely wait out the 10 year period. If it is not close in time, some taxpayers find installment agreements, offers in compromise, or bankruptcy to be an optimal solution. These–and other–remedies should be considered in light of your circumstances.
These cases can be difficult to resolve. If the IRS believes that it can collect the tax from you, it may try. This raises the question as to whether the IRS is actually trying to collect the debt. If not, you may have to decide whether you are comfortable letting the bear sleep until the collections statute expires and living with the consequences. Another option is to see if you actually owe the tax liability. There are a number tax deductions and credits that you may have missed. The research tax credit is a good example. Many taxpayers fail to claim the credit as they do not think they qualify. This is just an example. It is often advisable to get a second opinion about your tax return positions in these cases.
The IRS does have the ability to contact third parties about your tax debt; however, the IRS must generally give you notice that it intends to contact third parties in advance of contacting them. There are limitations that can apply to third party contacts.
It may be tempting to simply transfer your assets to another person or entity when you owe the IRS. Be warned, that there can be serious repercussions for doing so. Even selling a home or other major asset can be an issue when you owe the IRS. You can find out more about transferring assets when you owe the IRS, here.

IRS Penalties & Interest

The IRS usually does not impose late filing or payment penalties until the tax return(s) in question are filed. If it does impose penalties it is up to you to ensure that they are computed correctly and to specifically ask or act to get the penalties abated or removed. There are a few penalties that can be abated or removed by including statements with the late-filed tax returns. The Option 4 reasonable cause statement made under the IRS’s Offshore Voluntary Disclosure Initiative for late Forms 5471 are but one example.
It is up to you to ensure that the IRS computed the penalties correctly and to specifically ask or act to get the penalties abated or removed.
The IRS is required to remove interest in some circumstances. It others, such as an unreasonable delay on the IRS's part, it has the discretion to do so. It is up to you to request that interest on your unpaid taxes be abated in these circumstances.

IRS Audits, Appeals, and Litigation

The answer depends on whether your tax return positions are correct and supported by contemporaneous records and do not touch on grey areas of the law. If so, you should take the steps necessary to support your positions. If there are other considerations if your tax returns may not be entirely correct, if you do not have records, or if the return positions touch on grey areas of law. It is almost always advisable to hire a tax advisor who has experience in IRS audits in these cases.
There are a number of remedies, but the type of remedy that is available to you may vary based on when the adjustments were made. In many cases the best bet is to try to get the IRS to reconsider its position, to go to appeals, to have appeals reconsider its position, and/or to go to tax court. In other cases, the bankruptcy court or the district or another Federal court may be a viable option.
The IRS does have the ability to contact third parties about your tax returns; however, the IRS must generally give you notice that it intends to contact third parties in advance of contacting them. There are limitations that can apply to third party contacts.
There are a number of choices for taking the IRS to court. Most tax cases are heard by the U.S. Tax Court. The U.S. Tax Court operates slightly different than many other Federal courts. It even has streamlined procedures for non-lawyers. You can read more about these streamlined procedures here.

IRS Whistleblower Claims

The IRS’s Whistleblower program that pays rewards for information that leads to the collection of tax, penalties and/or interest. The payouts can be significant. You can find out more about the IRS Whistleblower program here.
The IRS is not permitted to provide much information to the whistleblower claimant, but it does have to provide some information. We can help locate the appropriate contact.

Tax Advice and Planning

The tax savings from using an outside tax advisor will often be significant. Indeed, the savings may even make the deal work where it would not otherwise. In addition, an outside tax advisor can help avoid later tax problems. In some cases, the outside tax advisors assistance may also help to avoid IRS penalties.
It is often advisable to have a tax advisor review closed transactions to ensure that they are reported correctly and that there are no opportunities that were missed. This is especially true if the IRS is likely to review or challenge the transaction.
The presentation of tax items on tax returns can trigger IRS audits and other problems. It is often advisable to hire an outside tax advisor to review your return and return filing positions prior to filing your return. This is particularly true in years where there are large, unusual, or questionable items reported on the tax return or omitted from the tax return.

Tax Returns

There can be serious ramifications to not filing Federal income tax returns.  Assuming that the IRS has not first contacted the taxpayer about the missing tax return, a tax return filing for the most recent tax year can normally be corrected by filing the return.  Then it is a question of whether penalties can be abated.  It is more complicated than this, however.  So a qualified tax advisor can and should be hired to help with this.
There can be serious ramifications to not filing Federal income tax returns.  This is particularly true where the taxpayer has not filed for several tax years.  There are a number of ways to come into compliance with our tax laws.  These remedies range from filing the unfiled returns and hoping the IRS just processes the returns to actively negotiating with the IRS on a no-name basis to arrange for the filing of the tax returns.  A qualified tax advisor can and should be hired to help with this.
There also serious ramifications for filing a false or fictitious tax return.  The IRS can assess civil and criminal penalties in these cases.    There may be time to correct prior year tax returns. A qualified tax advisor can and should be hired to help with this.
There are a number of persons who have to file tax returns, including:
  1. Individuals who live in the U.S. and all U.S. citizens wherever they live if their income exceeds certain limits.
  2. Corporations or Subchapter S corporations subject to income tax regardless of whether the return shows a tax due or a loss.
  3. Trustees and other fiduciaries of trusts and estates.
  4. Those who employ or pay amounts subject to withholding tax.
  5. Those who have a manufacturer or retailer excise tax, environmental excise tax, indoor tanning service tax, foreign insurance policy excise tax, and other insurance excise taxes.
  6. Domestic international sales corporations.
  7. Those who have a financial interest or control over a foreign financial account.
  8. Those who participate in reportable transactions that must be disclosed to the IRS.
  9. Those who make gifts in excess of the annual dollar amount exclusion.
  10. An estate of a person who passes away if the gross estate exceeds the basic exclusion amount reduced by the decedent’s adjusted taxable gifts.
  11. An estate for nonresident aliens who had assets located in the U.S.
Here is some more information about having to file tax returns.

Miscellaneous

The IRS uses a number of standard letters and notices.  Most of these notices relate to:

  1. Processing questions (i.e., the IRS received your tax return or other form and it was missing information needed to process the form),

  2. Tax assessment issues (i.e., you reported too little tax on your return or you did not file a return), or

  3. Tax collection issues (i.e., you owe a tax and the IRS would like payment).

So the first step is to try to determine which category your IRS letter or notice is in.  This may be obvious from the face of the correspondence.  In other cases, you may have to look to the name of the IRS office that issued the letter (such as the IRS ACS or Automated Collection System) or the job title for the IRS employee who sent the letter.  In other cases you may have to note the letter code (which is usually on the top right of the IRS letter or notice) and google the code to try to determine what the correspondence is about.

Here is a list of common IRS notices that may help you determine the best course of action.

Of course, if there is any doubt, you can (and should) call a qualified tax advisor.

The IRS is typically slow in processing tax returns and refund checks.  You should contact the IRS 800 number to check on the status of your return or refund.  If you are experiencing a significant delay and are not able to resolve the matter by calling the IRS 800 number, you may need to reach out to the IRS Taxpayer Advocate.  Again, another option is to hire a qualified tax advisor.

There is typically a very short period of time for bringing suit against service providers, including tax advisors.  We do not mention this as an encouragement to bring suit, but, rather, as a warning that you need to act quickly to protect your rights.  You should speak to a tax attorney as soon as possible.