Negotiating with the IRS: 6 tips from a tax professional
Negotiating with the IRS: 6 tips from a tax professional
You know that feeling of stress that overwhelms you as you try and correctly fill out those confusing IRS forms during tax time? Well, that’s nothing compared to the sinking feeling you get when a certified letter from the IRS shows up in your mailbox. In fact, it is a near statistical certainty that sooner or later in life there will come a time when you have to deal with the IRS on some level.
Whether it is something minor like substantiating a simple tax deduction on your 1040 to something more serious like a broad scope IRS audit, knowing where and how to negotiate with the IRS will greatly improve your chances of a positive and speedy outcome.
In this article series, “Negotiating with the IRS: 6 tips from a tax professional”, I will cover when, where, and how to successfully negotiate with the IRS. Each topic has been written as a stand alone article, but below you will find a summary of each.
Tip #1
Knowing is half the battle: Discovery is step 1 in an IRS negotiation
When attorneys are going to court, they first go through a process called “discovery.” Discovery is the process of getting all of the facts of your case together and organized plus finding out the details of your opponent’s case. Considering that when you call the IRS they may find a way to take property from you, you want to be overly prepared before you ever speak with the IRS on the phone.
Tip #2
How low can you go? Know your reasonable collection potential
Reasonable Collection Potential (RCP) is a term used by the IRS that refers to the amount of money they could get from you to pay off your IRS debts if they seized everything they could from you, garnished your wages, and levied your bank accounts and retirement savings plans. Knowing this amount in advance will give you the upper hand in the negotiation.
Tip #3
Honey vs. Vinegar: Align your goals with the IRS & earn some leeway
The job of the IRS is to promote and enforce what they call compliance. A compliant taxpayer is one who files tax returns on time, pays taxes on time, reports all income, and claims only valid tax deductions. If everyone did these four things, there would be little need for the IRS. Show the IRS that you want to become and stay compliant.
Tip #4
When to call the IRS
If you have prepared in advance, picking up the phone and calling the IRS is the fastest way to resolve your case and avoid additional measures such as IRS levies, tax liens, seizures, and wage garnishments.
Tip #5
When not to call the IRS
Before you ever pick up the phone to call the IRS keep in mind two things; first, the IRS is the nation’s most powerful and most effective collections agency and second, they do this every day – you don’t. When the IRS gets you on the phone, they will ask you a series of questions that you will be required to answer before they even let you ask them a question or dispute the validity of the debt. If you are not prepared for this conversation or not comfortable with the process, don’ pick up the phone. Instead, send them a letter requesting the necessary information, and whenever possible use the appropriate IRS forms. By using their forms, you are making it easy for them to answer your question and help you with your problem.
Tip #6
You’re in over your head; know when to bring in a tax pro
If you are in over your head with a tax problem, do yourself a favor and call in a tax pro. Tax professionals such as CPA’s, tax attorneys, and Enrolled Agents work with the IRS on a daily basis and know the ins and outs. They have the tools needed, and often have more credibility with the IRS than you do. So, don’t be afraid to utilize their expertise and resources when you get in over your head.
For more information about tax consulting and tax solutions for business owners, check out our website at www.assurancetaxadvisors.com
You know that feeling of stress that overwhelms you as you try and correctly fill out those confusing IRS forms during tax time? Well, that’s nothing compared to the sinking feeling you get when a certified letter from the IRS shows up in your mailbox. In fact, it is a near statistical certainty that sooner or later in life there will come a time when you have to deal with the IRS on some level.
Whether it is something minor like substantiating a simple tax deduction on your 1040 to something more serious like a broad scope IRS audit, knowing where and how to negotiate with the IRS will greatly improve your chances of a positive and speedy outcome.
In this article series, “Negotiating with the IRS: 6 tips from a tax professional”, I will cover when, where, and how to successfully negotiate with the IRS. Each topic has been written as a stand alone article, but below you will find a summary of each.
Tip #1
Knowing is half the battle: Discovery is step 1 in an IRS negotiation
When attorneys are going to court, they first go through a process called “discovery.” Discovery is the process of getting all of the facts of your case together and organized plus finding out the details of your opponent’s case. Considering that when you call the IRS they may find a way to take property from you, you want to be overly prepared before you ever speak with the IRS on the phone.
Tip #2
How low can you go? Know your reasonable collection potential
Reasonable Collection Potential (RCP) is a term used by the IRS that refers to the amount of money they could get from you to pay off your IRS debts if they seized everything they could from you, garnished your wages, and levied your bank accounts and retirement savings plans. Knowing this amount in advance will give you the upper hand in the negotiation.
Tip #3
Honey vs. Vinegar: Align your goals with the IRS & earn some leeway
The job of the IRS is to promote and enforce what they call compliance. A compliant taxpayer is one who files tax returns on time, pays taxes on time, reports all income, and claims only valid tax deductions. If everyone did these four things, there would be little need for the IRS. Show the IRS that you want to become and stay compliant.
Tip #4
When to call the IRS
If you have prepared in advance, picking up the phone and calling the IRS is the fastest way to resolve your case and avoid additional measures such as IRS levies, tax liens, seizures, and wage garnishments.
Tip #5
When not to call the IRS
Before you ever pick up the phone to call the IRS keep in mind two things; first, the IRS is the nation’s most powerful and most effective collections agency and second, they do this every day – you don’t. When the IRS gets you on the phone, they will ask you a series of questions that you will be required to answer before they even let you ask them a question or dispute the validity of the debt. If you are not prepared for this conversation or not comfortable with the process, don’ pick up the phone. Instead, send them a letter requesting the necessary information, and whenever possible use the appropriate IRS forms. By using their forms, you are making it easy for them to answer your question and help you with your problem.
Tip #6
You’re in over your head; know when to bring in a tax pro
If you are in over your head with a tax problem, do yourself a favor and call in a tax pro. Tax professionals such as CPA’s, tax attorneys, and Enrolled Agents work with the IRS on a daily basis and know the ins and outs. They have the tools needed, and often have more credibility with the IRS than you do. So, don’t be afraid to utilize their expertise and resources when you get in over your head.
For more information about tax consulting and tax solutions for business owners, check out our website at www.assurancetaxadvisors.com
