Many taxpayers are currently receiving correspondence from the Internal Revenue Service. Notices that were on hold because of Covid-19 and lack of funding to enforce compliance are resumed. Some taxpayers are now realizing that the Service did not overlook the past due accounts or unfiled tax returns. The primary taxpayers who are currently receiving notices are the high income earners and the non filers. Unfortunately, many taxpayers ignore the letters to their detriment. Even worse, some taxpayers know the content of the letters very late when they seek professional help because they did not open the letters.
If you are afraid to open the letter, contact a tax resolution professional, as early as possible, who could relieve the stress by opening the letter, explaining the content, and discussing a resolution option.
The IRS states that the new initiative is made possible by the Inflation Reduction Act funding. Letters have been going out on more than 125,000 cases where tax returns have not been filed since 2017. “The mailings include more than 25,000 to those with more than $1 million in income, and over 100,000 to people with incomes between $400,000 and $1 million between tax years 2017 and 2021”.The IRS Commissioner continues to states: “If someone hasn’t filed a tax return for previous years, this is the time to review their situation and make it right. For those who owe, the risk will just grow over time as will the potential for penalties and interest. These non-filers should review information on IRS.gov that can help and consider talking to a trusted tax professional as soon as possible.”
According to the IRS, tax forms for the non filers have been received from third party information, such as through Forms W-2 and 1099s indicating these people received income in these ranges but failed to file a tax return. If a taxpayer repeatedly fails to respond and does not file, the IRS may create a substitute tax return for the taxpayer. It is always in the taxpayer’s best interest to file their own tax return to take advantage of any exemptions, credits and deductions that they are legally entitled to receive.
The IRS has several means available to enforce tax filing compliance and payments of taxes due. The penalty for late filing or failure to file is much higher for business tax returns. Pay as much as you could, as soon as possible, to lower the penalty and interest. The IRS could be lenient in certain cases. The Service, in fact, advises taxpayers to borrow money to pay a tax due because for some taxpayers the interest imposed by the IRS could be much higher.
Many taxpayers inquire if they could call the IRS to offer to pay less than the amount due. The answer is NO. To pay less than what is owed, taxpayers have to qualify for an offer in compromise (OIC).
There are many ways to resolve a tax debt. However, a taxpayer needs to be in compliance for the past 6 years to obtain an abatement, an installment agreement, and an offer in compromise.
- Some taxpayers could be qualified for an abatement (FTA) of the penalty.
- Some taxpayers could use the reasonable cause exception to get relief from tax debt.
- Taxpayers could also request for Currently Not Collectible (CNC) status when the payment of the tax due would cause a significant financial hardship on the family.
- Taxpayers could request an installment agreement (IA). An installment agreement is easily approved and could be modified based on changing financial circumstances.
- Taxpayers could apply for an offer in compromise (OIC) if they meet certain requirements.
An Offer in Compromise is an agreement between a taxpayer and the Internal Revenue Service that settles a taxpayer’s tax liabilities for less than the full amount owed. It is not suitable to every taxpayer. It is a long process because it requires a thorough review of taxpayers’ financial documents. Generally, more offers in compromise are rejected by the IRS than those accepted. A taxpayer’s unique facts and circumstances are taken into account to qualify for an offer in compromise. The Internal Revenue Service will look at the taxpayer’s ability to pay, income, expenses, and asset equity.
Never ignore a tax due letter, regardless of your financial situation. Seek the guidance of a tax resolution professional to represent you before the IRS.
Remember that taxpayers might not be able to obtain a passport or travel when they owe over $50,000 because under current law, enacted in 2015, this is information could be reported to the Department of State.
Hiring a tax resolution expert is the best action a taxpayer could take in a tax matter before the IRS or a state tax authority.
We offer FREE initial consultation!!!
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