Twenty million Americans owe more than $200 billion in back taxes, according to the Internal Revenue Service (IRS). What does this say about us as a people? Are we inherently selfish and dishonest? Is cheating on our taxes as American as apple pie?
Employees of one of the world’s most feared federal agencies are reluctant to use terms like “tax fraud” or “criminal” when describing people who are delinquent 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 are late paying their taxes. However, if you choose to ignore the IRS, be careful. They can and will take action to make sure you pay your tax debt. Owing to the IRS is serious business. This agency has almost complete power over tax-paying citizens. They can deduct money from your bank account, deduct your salary, or fine you for failing to make a payment. Therefore, every taxpayer who does not submit an SPT or is in arrears must contact a tax consultant as soon as possible.
Tax Professional
A tax consultant can assess your situation and contact the IRS on your behalf. As tax professionals, they will work with you to ensure you file all delinquent tax returns and regain IRS compliance. As expert negotiators, they can save a lot of money by reducing or eliminating fines and interest charges. They may even be able to reduce your overall tax debt if you qualify for an IRS settlement.
The Art of Compromise
The chances of a citizen negotiating a lucrative tax deal with the IRS are less than you might think. And the government knows it. National Taxpayer Advocates recently reported to Congress that when “EITC taxpayers are represented on an audit, they are almost twice as likely to receive EITC and receive nearly twice the amount of EITC as non-represented taxpayers.” Tax professionals have a proven track record of ensuring taxpayers are represented and reducing the total tax debt when taxpayers qualify. This is not financial magic or alchemy. Tax accountants use tax laws to prepare offers that the IRS must accept. Unlike credit card debt, the IRS tends not to take small amounts of money for quick settlement. But the IRS will take less of what you owe if you qualify. Although negotiations are part of this process, the US tax code plays a much larger role in determining who qualifies and who does not. If you don’t have a tax professional to guide you, your chances are of successfully negotiating a reduced tax settlement.
An experienced tax accountant will generally demand installment agreements for his clients. These deals allow you to pay off your debt over time without the threat of excessive fines, penalties, or interest charges hanging over your head. A talented tax consultant may be able to reduce your total tax debt if you agree to pay ahead of schedule.
Forgive Interest and Fines
Another standard technique in the tax relief playbook is to get the IRS to excuse or condone interest payments, fines, and penalties. This can be achieved if the taxpayer or his or her representative can clearly demonstrate that he/she acted on poor advice from the IRS, or if the surcharges and penalties are inaccurately assessed. While it doesn’t happen every day, experienced tax accountants can get the IRS to waive fines and interest payments for some clients.
Unbilled Status
Another technique experienced tax consultants use is actually the dilation tactic. When delinquent taxpayers are listed as “currently uncollectible,” the IRS will not try to collect money from them. To be considered for this status, the taxpayer or their representative must convince the IRS that they are unable to meet their tax burden. Again, the debt will not be forgiven, it will only be postponed and all fines and penalties will be postponed. If the taxpayer remains uncollected for ten years, the statute of limitations applies and the IRS will write off the debt. On the other hand, if taxpayers regain financial footing, the IRS will continue collection activities to try and collect the debt.
