About Tax Resolution Companies
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?
The Federal Trade Commission has warnings for consumers which echo these concerns. You can read about the FTC article on tax resolution companies, here.
You can also find some tips for selecting the right tax firm, here.
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.
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.
You can find information about these tax reduction options here.
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. You can find out more about these tax collection options here.
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.
Absent a lien notice, the buyer and the IRS may not ever be aware of the transfer. If the property is sold for fair value to an unrelated party, the IRS may not be able to recoup the property. There are a number of rules that have to be considered, however.
Even if the IRS has filed a lien notice, the IRS may agree to allow the sale. It often does this by issuing a certificate of discharge. You can read more about the IRS certificate of discharge here.
You may also want to consider whether you qualify for innocent spouse relief. This applies when you file a joint income tax return and the tax debt relates to that return.
This includes appealing the decision, requesting a collection appeal hearing, filing a TIGTA complaint, and even suing the IRS.
IRS Penalties & Interest
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.
You can find out more about getting IRS penalties abated, here.
IRS Audits, Appeals, and Litigation
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.
If you haven't yet filed your tax return, you should read about our tax return audit defense. This is a service where you pay a small fee at the time you file your return and then, if there is an audit, we handle the audit at no additional cost to you.
IRS Whistleblower Claims
Tax Advice and Planning
There may be time to correct prior year tax returns.
A qualified tax advisor can and should be hired to help with this.
- Individuals who live in the U.S. and all U.S. citizens wherever they live if their income exceeds certain limits.
- Corporations or Subchapter S corporations subject to income tax regardless of whether the return shows a tax due or a loss.
- Trustees and other fiduciaries of trusts and estates.
- Those who employ or pay amounts subject to withholding tax.
- 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.
- Domestic international sales corporations.
- Those who have a financial interest or control over a foreign financial account.
- Those who participate in reportable transactions that must be disclosed to the IRS.
- Those who make gifts in excess of the annual dollar amount exclusion.
- 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.
- An estate for nonresident aliens who had assets located in the U.S.
There are circumstances where you may be able to request not to be liable for a joint liability. This is referred to as innocent spouse relief. You can read more about innocent spouse relief here.
Processing questions (i.e., the IRS received your tax return or other form and it was missing information needed to process the form),
Tax assessment issues (i.e., you reported too little tax on your return or you did not file a return), or
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.