If I Ignore Those IRS Notices, Maybe They Won’t Bother Me
By Charles W. Miller
Copyright 2011 ©
You’ve had a great day at work. All of your projects went well and that co-worker you can’t stand got chewed out by the boss. You’re in a great mood and nothing can spoil it.
On the way into your house, you pick up your mail as usual. An official-looking envelope catches your eye. “IRS, Department of the Treasury.” Your heart sinks into your stomach. So much for your good day.
You take the envelope inside and stare at it for a few moments, scared to open it and unleash the horrors that surely reside within. After spending most of the evening looking at it, you toss it into the drawer with the numerous other unopened letters you have received from the IRS. “Maybe if I ignore it they will leave me alone” you think hopefully.
The very first thing you should do with a letter like this is to open it. It may be something as simple as a general notice from the IRS that all taxpayers receive. You’ve worried for nothing.
It may be a notice that you are entitled to funds from the IRS. While this doesn’t happen often, it does happen.
If it is a notice that you owe the IRS money then you should consult with a competent tax professional as soon as possible. Many CPAs and lawyers are qualified to assist you with your problem. The key is to seek the help of an expert immediately as such a person can help you determine if you truly owe what the IRS suggests you do.
Often the IRS letter has been generated by a computer and no human has even been involved with its transmission. If the IRS receives information (often electronically) that you appear to have income that was not reported then a letter like this goes out to you. It is at this point that you have the greatest chance of resolving this matter in a quick and relatively inexpensive manner.
If the letter is more ominous then you absolutely must act with all due speed. Watch for words like “Levy” and “Seizure” as these are words that indicate harm to your assets is imminent.
The IRS is usually willing to work with taxpayers who are making a sincere effort to resolve the tax matter. There are a number of options available to resolve a tax dispute.
You may qualify for an “Installment Agreement” whereby the IRS agrees to accept payments from you over time. There is, of course, paperwork that you must complete in order to qualify for this, but if you do, it can be a good way to resolve smaller tax controversies.
Installment agreements can sometimes be impractical due to the amount you owe or your inability to pay in such an arrangement. A better alternative in that case would be an “Offer in Compromise” or “OIC.” The IRS actually prefers these agreements to installment agreements.
An OIC is a scientific process whereby you offer to settle your tax liability for a lump sum amount, which is usually much less than you owe. The paperwork required to file an OIC is deceptively simple. Getting the IRS to accept your offer is a different matter altogether. In fact it is advisable to have a tax professional handle this for you because the actual IRS rules that apply to determining acceptance of OICs are quite tricky.
An OIC can be paid under the “short-term” method whereby you may break the offer into five or fewer (usually monthly) payments or under the “long-term” method whereby you may break the offer into twenty four or fewer (usually monthly) payments. You typically will have to pay at least 20% down with a short-term OIC or the first monthly payment with a long-term OIC.
Further, a qualified tax professional can negotiate with the IRS to obtain additional reductions in the OIC amount that can be significant.
There is much more to how this all works but the message is that a tax problem does not have to be hopeless.
Finally, there are a number of companies that advertise on national television about their ability to settle IRS debts for pennies on the dollar. Be very careful before hiring such a company. Many of these companies take large fees from taxpayers, file one OIC which is often rejected, and then either abandon the taxpayer or require more money to continue. You may well be much better off using a local expert who will be there to guide you through this process in person.
The foregoing article is for general education only and does not constitute the rendering of legal advice. Always consult a competent attorney on any matter which may affect your legal rights.