Employees for one of the most feared federal agencies on earth are loath to use terms like "tax cheats" or "criminals" when describing people who have gotten behind on their taxes. After all, they know how complicated the current tax code is. As a general rule, IRS employees are willing to work with people who have fallen behind on their taxes. However, if you choose to ignore the IRS, watch out. They can and will take actions to make sure you pay your tax debt.
Owing money to the IRS is serious business. The agency has almost plenary powers over taxpaying citizens. They can deduct money from your bank account, garnish your wages, or fine you for failing to make payments. That is why every taxpayer who has failed to file a tax return or is in arrears should contact a tax consultant as soon as possible.
Tax Professionals
Tax consultants can assess your situation and contact the IRS on your behalf. As tax professionals, they will work with you to make sure you file all delinquent tax returns and regain compliance with the IRS. As expert negotiators, they can save you beaucoup bucks by reducing or eliminating fines and interest fees. They may even be able to reduce your overall tax debt if you qualify for an IRS settlement.
The Art of Compromise
The odds of an individual citizen negotiating a favorable tax deal with the IRS are less than you might think. And the government knows it. The National Taxpayer Advocate recently reported to Congress that when "EITC taxpayers are represented in audits, they are nearly twice as likely to receive the EITC and receive almost twice the amount of EITC as unrepresented taxpayers." Tax professionals have a proven track record of making sure taxpayers are represented and of reducing total tax debts when the taxpayer qualifies. It isn't magic or financial alchemy. Tax accountants use tax laws to prepare offers the IRS should accept. Unlike credit card debt, the IRS tends not to take less money for a speedy settlement. But the IRS will take less than you owe if you qualify. While negotiating is part of this process, the U.S. tax code plays a much larger role in determining who qualifies and who doesn't. If you don't have a tax professional to guide you, your odds of successfully negotiating a tax settlement drop.
An experienced tax accountant will generally insist on installment agreements for his client. These deals let you pay down your debt over time without the threat of fines, penalties, or excessive interest charges hanging over your head. A talented tax consultant may be able to further reduce your total tax debt if you agree to pay ahead of schedule.
Forgive Interest and Penalties
Another standard technique in the tax relief playbook is to get the IRS to excuse or forgive interest payments, fines, and penalties. This can be accomplished if the taxpayer or his representative can clearly demonstrate that he acted on bad advice from the IRS, or if the extra fees and penalties were assessed improperly. While it doesn't happen every day, experienced tax accountants can get the IRS to excuse fines and interest payments for some clients.
Non Collectible Status
Another technique utilized by experienced tax consultants is actually a dilatory tactic. When a delinquent taxpayer is listed as "currently not collectible," the IRS will not try to collect any money from them. To be considered for this status, a taxpayer or his representative must convince the IRS that he simply cannot meet his tax burden. Once again, the debt will not be forgiven, it will simply be delayed and all fines and penalties will be put on hold. If the taxpayer remains in a non collectable status for ten years, the statute of limitations kicks in and the IRS will write the debt off. On the other hand, if the taxpayer regains better financial footing, the IRS will resume collections activity to try and collect the debt.
