Is Your Tax Situation Causing You Pain?

 

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Perhaps, a little humor can help the “medicine go down”

Is a Tax problem (and pain) keeping you up at night? If so, I hope to provide you some relief to feel better by:

  • Helping you Identify your status & gain perspective
  • Provide education – process, proposed solutions, and
  • Suggest do’s and don’t to remedy your situation, or
  • Identify those that can legally help you and with what

Pain Scale:

0 – I hope it stays this way – always

Mild Pain – Filed an extension & still not ready to file?

1-2 – Mild Pain – Can be Ignored?

Moderate Pain – Audit – Find your Records?

3 or 4: Interferes with Tasks

5 or 6: Interferes with Concentration

Severe Pain – Assets seized? Wage Garnishment?

7 or 8: Interferes with Basic Needs

9 or 10: Bed Rest Required

Regardless of your situation, know that you are not alone and help is available.

Tips for those with a Mild diagnosis

  • You have until 10/17/16 to file your 2015 return
  • Now is the time to request help if you want it
  • Reminder to stay current with your estimated tax payments for 2016

Tips for those with a Moderate/Severe diagnosis

Remind yourself that being afraid of things going wrong isn’t the way to make things go right.

Fear is interest paid on a debt you may not owe” – anonymous

Take a breath and let’s dig deeper.

There are 3 types of IRS Audits (verified compliance)

  • Correspondence Exam– not Face to Face
  • Office – Local IRS office – Desk Audit
  • Field – Your office or home or your Accountants office

Audit Scope/Complexity varies from low to high risk

  • In a Correspondence Audit, the IRS, generally, will not expand the scope
  • If you request a transfer to an Office Audit, because of complexity or large amount of documents, the Revenue Agent has the authority to Expand the Scope- IRS internal approval required
  • Field Audit scope can be expanded without approval 

An Audit LifecycleSimplified

  • Inquiry
  • Provide info
  • Wait
  • Proposed Changes
  • Wait
  • Provide Additional info
  • Finalize

Timeframe to Resolve (perspective)

  • Correspondence Exam – 3 to 6 months
  • Office Exam – can take over a year

 

What you need to know:

  • A discrepancy is not an audit; i.e. Form CP 2000, but should be treated like an audit
  • For Audits, the Burden of Proof, falls upon the Taxpayer- show why you are entitled to deduction
  • The IRS may give you a Proposed Tax Bill if you don’t substantiate your position
  • Your Tax Adviser can help you by being the Auditor before the Audit; examples:
  1. Can help you identify Audit Risks – problem areas on your return and/or overlooked deductions & credits
  2. Poor Books & Records & the need to recreate

 

Dos and Don’ts

Do:

  • If you handle your own IRS correspondence, Be Clear, Concise, and To The Point
  • Do provide credible evidence
  • Be timely in your response and provide the requested information – Be organized and help them do their job
  • Do know the Limits on Representation:
  1. CPA, EA, & Attorney can help through the Appeals process
  2. Attorney only for Tax Court

 

Don’t:

  • Do not include needless facts- the auditor could miss your main point if you ramble
  • Do not send/bring a big box of loose unorganized paper- this sets your audit off on the wrong foot
  • Don’t ignore their letters

Action Steps:

  • Read what the IRS is looking for
  • Gather documents, organize, & summarize
  • Recreate unavailable documents
  • Decide, am I going to do this alone or get help

 

Process:

Audit Determination:

  • No change
  • Agree with changes – make payment arrangements
  • Disagree with changes – Appeals Mediation or Appeal

Collection:

  • Generally, the IRS will send you a written notice requesting that you pay a specific amount
  • If not paid and you do not contact them, the IRS could force you to pay by taking future refunds, placing liens on your property, seizing assets, & garnishing your wages

Installment Agreement:

  • Signed agreement to pay down the debt over a period of time
  • Can prevent Wage Garnishment IF payments are made on time

Offer in Compromise:

  • An agreement to settle the debt for less than the amount owed
  • You must qualify by meeting compliance and eligibility requirements. Requirements are strict and the IRS only accepts this under limited conditions

Appeals Mediation:

  • Alternative Dispute Resolution
  • Helps to develop resolution strategies
  • Appeals mediator has no power to render a decision or to force either party to accept a settlement.

Appeal:

Appeals is the place for you if ALL of the following apply:

  • You received a letter from the IRS explaining your right to appeal the IRS’s decision.
  • You do not agree with the IRS’s decision.
  • You are not signing an agreement form sent to you.

 

Closing Comments:

  • This blog is intended to provide you some insight and helpful solutions. It is not exhaustive of all possibilities
  • 1st Time Abatement Penalty and relief from other penalties were not discussed in this blog

 

If you have questions, feel free to call me at 619-549-2717.

“They always say time changes things, but you actually have to change them yourself “ – Andy Warhol

 

Thanks for reading,

Deb

Deborah Ann Fox, CPA helps Small Business Owners & Individuals build and protect their financial wealth. She can help by being your financial compass while you captain your ship.

Debbie offers free 30 minute no obligation consultations. We can discuss/resolve via a mix of e-mail, phone, virtual, and in-person communications.

http://www.debfoxfinancial.com

Call 619-549-2717

E-Mail me @ debfoxfinancial@gmail.com 

Twitter: @debfoxfinancial

Facebook: Deborah Ann Fox, CPA

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