Facing an Internal Revenue Service audit could be very draining for a taxpayers in many ways. However, you do not have to endure the pain because there is help available. Taxpayers are encouraged to seek the service of a tax professional to assist them with their tax problems.

Taxpayers must answer to correspondence from the Internal Revenue Service when an action is required. Do not dismiss any letter. Generally, taxpayers have 30 days to answer to an IRS correspondence.

There are many options available to resolve a tax debt. Consult with a competent and qualified professional to learn of the options available to your specific case to get your peace of mind. Many taxpayers have misconceptions about the options available. Each taxpayer’s case could be unique. A method of resolution for one taxpayer could not be applicable to another taxpayer.

Do not follow the advice of those who wrongly told you to let the status of limitation expire! A tax problem usually does not go away without action!

Many taxpayers seem to not understand the first time abatement and the currently not collectible status. Here is a summary:

First Time Abatement (FTA) 

As the name implies, taxpayers are qualified for penalty abatement only once for a tax penalty assessed. If a taxpayer has a recent penalty removed, waived or abated the first time penalty abatement is not available. The Internal Revenue Service provides administrative relief from the following penalties if the qualifying criteria are met:

    1. Failure to file (FTF) penalty under IRC 6651(a)(1), IRC 6698(a)(1), or IRC 6699(a)(1),

    2. Failure to pay (FTP) penalty under IRC 6651(a)(2) and/or IRC 6651(a)(3), and

    3. Failure to deposit (FTD) penalty under IRC 6656. 

This is an administrative waiver that was implemented in 2001. It is available for penalty relief the first time a taxpayer is subject to one or more of the above referenced penalties for a single return.

When the FTA criteria have been met, taxpayers would not receive relief unless the following are true: 1) The taxpayer has filed, or filed a valid extension for, all required returns currently due, and 2) The taxpayer has paid, or arranged to pay, any tax currently due.

Currently Not Collectible (CNC)

Taxpayers could request the CNC when the payment of the tax due would cause a significant financial hardship on the family. To determine economic hardship, the service will consider any information provided by the taxpayer as outlined in the relevant Treasury Regulation.

When a case is classified as CNC, the IRS acknowledges that it could not get any money out of the taxpayer if it tried.

If the taxpayer’s situation changes and the taxpayer starts making significant money again during the 10 years, the IRS can try to collect from the taxpayer again. That is why it is called “currently not collectible”.

The Internal Revenue Code in section 6343(e) requires the release, as soon as practicable, of a levy on salary or wages due to a taxpayer upon agreement with the taxpayer that the tax is currently not collectible. Taxpayers in CNC will not be subjected to the usual collection efforts. The IRS will not garnish their wages or put a levy on their bank accounts, and they will not be required to set up an installment agreement. However, the IRS could still put a lien on your property!

The IRS does not try to collect when taxpayers are in “uncollectible” status. When the 10 years runs, the statute of limitations for the time to collect, the taxes are no longer enforceable against taxpayers, and the bills stop coming.

If taxpayers have IRS tax liens filed against them, when the statute of limitations runs, the liens are either released or taxpayers can ask the IRS to release them. Taxpayers only have 30 days to do so.

  You could reduce your tax liability by proper tax planning strategy as individual or business owner?

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