There are many questions and concerns that pop into a taxpayers mind when they find out that they are being audited. One of the more commonly asked questions is whether or not the IRS can take their house. Yes, the IRS can take a person’s home to collect on unpaid tax bills. This is usually a last resort however, and the taxpayer’s Bill of Rights discourages the IRS from seizing a primary residence. That doesn’t mean however, that if you own rental property or a second home that these properties will not be seized. The IRS can not just take your home though. There are standard procedures that they must go through first. They must obtain a court order, which you can contest. You can also request the Taxpayer Advocate Service to help you in stopping the seizure. Taking someone’s home gathers negative publicity when local news agencies find out. The IRS doesn’t like this kind of image, so a call to the newspaper, TV Station or government officials may be helpful.
Another frequently asked question is if one can make a deal with the IRS to pay less then the total tax bill. This is a possibility though other measures are recommended. If you absolutely want to try this path, start by filing a 656 form, which is an Offer in Compromise. This will open up your finances for thorough investigation before they decide if settling for less than what you owe would be in the best interest of the IRS. Just about half of the offers made are eventually accepted, but notably after negotiations. Rarely will the taxpayer get what he/she originally asked for. In most cases, the IRS will determine an amount that they believe is fair. Generally, contesting the IRS audit will end up with you owing less then the Tax Bill anyways, so sometimes it just pays to contest it from the beginning.
Lastly, people want to know how likely it is that they will be charged with criminal tax fraud. Fewer than 2% of taxpayers are investigated for tax fraud. Additionally, the majority of those prosecuted for tax fraud work in some type of organized crime or are public figures. Being found guilty of tax fraud by your auditor and being criminally charged with it are two different things. Out of the 2% that are investigated for it, the majority ends up paying fines.
Showing posts with label IRS Penalties. Show all posts
Showing posts with label IRS Penalties. Show all posts
Thursday, July 30, 2009
IRS Representation and why it is Important
Getting a tax advisor can help when dealing with IRS problems. In the beginning, when you consult with an advisor, you will have a good idea of what you can expect from the IRS auditor during this stressful time. You will be informed of what kinds of questions you will be asked and what documents they will request to see. The tax advisor has probably, or at least should have, experience in dealing with an IRS auditor.
Getting through an audit is much like playing a game of chess. Knowing your opponent’s next moves are critical, and having a game plan or strategy will help your situation. Since tax advisors have played this game before with this opponent, they are usually better qualified at limiting your burden.
During the audit, an attorney, public accountant or enrolled agent will meet with the auditor in your place. Your representative is less emotionally involved, less defensive but most importantly they are able to negotiate on the law. Since they speak the same language as the IRS auditor, they have a better chance of reeling in the prize, which unfortunately for you just means less scrutiny and/or penalties.
Once the audit has been completed and the report is final, you may be asked to sign some documents. It is vital at this stage that you have your representative review the form before placing your “John Hancock” at the bottom. You should fully understand and agree to what you are signing before you sign. Your signature is your word that everything in the documents for which you are signing is true and correct. Having someone carefully review and explain to you the repercussions of signing the document is your right so you should use it.
Make sure that your line of communication is always open with your representative. It is imperative that he/she knows everything about your return, situation or documentation received. If you are represented, it is recommended that you do not correspond with the auditor in anyway unless directed to do so by your representative. While an IRS audit is tough, you will get through it with some patience.
Getting through an audit is much like playing a game of chess. Knowing your opponent’s next moves are critical, and having a game plan or strategy will help your situation. Since tax advisors have played this game before with this opponent, they are usually better qualified at limiting your burden.
During the audit, an attorney, public accountant or enrolled agent will meet with the auditor in your place. Your representative is less emotionally involved, less defensive but most importantly they are able to negotiate on the law. Since they speak the same language as the IRS auditor, they have a better chance of reeling in the prize, which unfortunately for you just means less scrutiny and/or penalties.
Once the audit has been completed and the report is final, you may be asked to sign some documents. It is vital at this stage that you have your representative review the form before placing your “John Hancock” at the bottom. You should fully understand and agree to what you are signing before you sign. Your signature is your word that everything in the documents for which you are signing is true and correct. Having someone carefully review and explain to you the repercussions of signing the document is your right so you should use it.
Make sure that your line of communication is always open with your representative. It is imperative that he/she knows everything about your return, situation or documentation received. If you are represented, it is recommended that you do not correspond with the auditor in anyway unless directed to do so by your representative. While an IRS audit is tough, you will get through it with some patience.
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