What is tax resolution? Tax resolution is the goal for any taxpayer in hot water with the IRS – no matter what their trouble might entail. The IRS, as an organization, is tasked with enforcing US tax law and ensuring that taxpayers fulfill their obligations and pay their respective tax liabilities. However, misconceptions, misunderstandings, and unfortunate circumstances can lead to tax debt, tax penalties, and unexpected fees or visits from the IRS.
Resolving issues with the IRS can be difficult. There are countless rules and regulations in tax law, and the process for resolving any given issue may require that you work your way through multiple dry publications, pick out the appropriate forms, dig up three years’ worth of paperwork, and do so in a timely manner – all while keeping up with the year-to-year changes that affect your eligibility and requirements when applying for any given type of tax resolution.
Understanding what tax resolution is and what avenues you might need to pursue depending on your given issue can be a great advantage.
What Is Tax Resolution?
Tax resolution is a catch-all term describing the step-by-step resolution of any tax-related issues you might have with the IRS, as well as local and state tax authorities. These can include:
- Unpaid taxes/back taxes.
- Additional tax liability due to changes in income or a mistake on your return.
- Penalties due to missed deadlines and late filing.
- Tax audits caused by suspicious or inconsistent returns.
- Federal tax liens issued against you or your business.
- A tax levy on your wages, assets, or property.
- Tax litigation in the US tax court.
- Appeals within the IRS for decisions on your account that you do not agree with.
Some of these issues are greater than others. A simple tax bill of a few hundred dollars due to an unexpected change, a rounding error, or a mathematical mistake might come as an unwanted and unpleasant surprise, but it isn’t the end of the world for most taxpayers. But failing to file and pay your taxes for several years, whether due to financial destitution or some other issue, may require professional help to seek a proper resolution.
Similarly, transcript errors and mistakes made on the IRS’s part require you to seek an appeal and argue why the mistake is wrong. Having professional tax representation at your side can help you better argue your case and organize the proper evidence. If your tax debt is stacking up to the tens of thousands of dollars, paying it off in just a few weeks becomes unfeasible. Tax resolution services help you put together a payment plan to resolve your debt over the next few years or even help you and the IRS settle for a lower total tax liability if your circumstances permit it.
How Do You Resolve Tax Issues With the IRS?
Your avenues for tax resolution depend on the issue you are having. The IRS offers low-income taxpayers a slew of resources in the form of recommended low-income taxpayer clinics and local tax experts, as well as the official Taxpayer Advocate Service. The agency also encourages taxpayers to come forward with questions and discuss their situation with an IRS employee to gain guidance on the next steps.
Alternatively, you can seek out the services of a tax attorney, enrolled agent, or certified public accountant for in-depth tax advice, from how to improve your income returns to reduce tax liability and determine potential deductions and credits to apply for, for seeking personal representation when talking to the IRS about your tax debt.
Figuring Out Your Tax Situation
In addition to talking to the IRS or a tax professional, there are other online resources to help you determine whether you might be owing money to the IRS. The easiest way to access your tax account and review your tax liability and any outstanding debts/payments are via the IRS website. You can register and log in to your tax account with your Social Security Number and enroll to receive a Tax Identity Protection PIN for additional security.
Your online tax account gives you an overview of your tax records, communication preferences, your tax balance, payment plans, and authorization requests made by tax professionals associated with your SSN and tax details. It’s worth keeping in mind that the IRS must always inform you of a discrepancy in your return and potential or follow-up tax bill via mail through notices.
In addition, the IRS must notify you via mail before engaging in any collection actions unless those actions are deemed immediately necessary to preserve the government’s chance to collect on your debt (i.e. the government has a reasonable concern that the taxpayer is taking steps to actively avoid the liability process or commit fraud). For the vast majority of delinquent taxpayers, the IRS will follow a predictable process of collections, including the requisite notices.
If you have not received any notices from the IRS, consider contacting them to ensure that they have the right mailing address. Otherwise, any attempt to collect from you – especially via the phone or email – is likely a tax scam. Even private debt collection agencies working with the IRS cannot ask you to pay over the phone. You can report tax scammers to the Treasury Inspector General for Tax Administration, and the Federal Trade Commission, as well as forward potential phishing emails to firstname.lastname@example.org.
Your Options for a Tax Debt Resolution
Many cases of tax resolution ultimately revolve around resolving tax debt. Your options for doing so are generally limited to:
- Pay now
- Pay over time
- Pay later
Federal tax debt is one of a few types of debt that cannot be eliminated through bankruptcy. While there is an expiration date on your debt, the IRS is also entitled to harsher and harsher collection actions leading up to that date, including seizing your assets and wages. Given that tax debt can grow steeply through penalties and interest, your best option is to seek an immediate tax resolution.
If you cannot pay now, you can enter into an installment agreement with the IRS. Installment agreement terms and fees differ depending on the size of your debt, the length of the agreement, and your financial situation. In some cases, you can avail of a simple installment agreement by agreeing to automated withdrawals from your account. In other cases, you may have to fill out an information statement to verify that you are financially eligible for an installment agreement.
If you cannot pay the entirety of your debt within a reasonable period, you may want to talk to a professional about reducing your debt through an offer in compromise. A basic requirement for tax resolution is being current on your tax returns, regardless of what payment plan or installment agreement you decide to enter into. Delinquent returns are usually a disqualifying factor for an installment agreement. However, the IRS offers a little leeway in this situation – usually, you need only be current on the last six years’ worth of tax returns.
Failing to contact the IRS about a payment plan or stalling/defaulting on your payments can lead to a federal tax lien or a tax levy on your assets, properties, and wages. Resolving liens and levies usually involves making a commitment to an installment plan or paying off your debt entirely. Thus, the sooner you get started, the lower your risk of getting into deeper trouble with the IRS.
Seeking Professional Representation
Whether you need help understanding your tax resolution options, navigating the IRS’s requirements, or are in need of representation against the IRS in the US Tax Court or during an in-depth tax audit, it’s always a good idea to consult a tax professional. A tax resolution firm can help you and your business navigate the IRS’s requirements and minimize your costs, both in terms of fees and penalties and overall tax liability. Don’t let the IRS overwhelm you. Let us help you figure out the best path forward.