Archive for Statutory Notice of Deficiency

Time Period for Collecting Taxes

June 26, 2011 Appeals & Audit Resolution, Back Taxes Owed, Bankruptcy, Cancelled Debt, Self Employ, Small Business, Statutory Notice of Deficiency, Sub-chapter S, Tax Abuse, Tax Court, Tax Guidance & Preparation, Tax Problems & Requests, Tax Relief

By law, the IRS has the authority to collect outstanding Federal taxes for 10 years from the date your tax liability was assessed. The 10-year collection period is suspended:

●  while the IRS and the Ofice of Appeals consider a request for an installment agreement or an offer in compromise.

●  from the date you request a CDP hearing until Appeals issues a CDP Notice of Determination or, if you seek review in the Tax Court, until the Tax Court’s decision becomes final, including appeals to a United States Court of Appeals.

●  from the date you request innocent spouse relief until a final Notice of Determination is issued or, if you seek review in the Tax Court, the date the Tax Court decision becomes final and for 60 days thereafter. If, however, you appeal the Tax Court’s decision regarding your right to innocent spouse relief to a United States Court of Appeals, the collection period will begin to run 60 days after the filing of the appeal unless a bond is posted with the appeal.

●  for tax periods included in a bankruptcy while the automatic stay is in effect, plus an additional six months.

●  while you are residing outside the United States, if you are absent for a continuous period of at least six months. The amount of time the suspension is in effect will be added to the time remaining in the 10­year period. For example, if the 10-year period is suspended for six months, the time left in the period we have to collect will increase by six months.

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How to Respond to the ’90 Day’ IRS Letter aka Statutory Notice of Deficiency – IRS Publication 3598

June 7, 2011 Amended Tax Return, Appeals & Audit Resolution, Audit Technique Guide, Back Taxes Owed, Enrolled Agent, Intent To Levy, Intent To Lien, IRS Appeal, IRS Audit, IRS Collections, IRS Enforcement, IRS Examination, IRS Levy, IRS Lien, IRS Mediation, IRS Penalties, IRS Penalty and Interest Abatement, Non-filed Tax Returns, Paying Taxes, Statutory Notice of Deficiency, Tax Guidance & Preparation, Tax Relief

The IRS publishes a short but precise set of instructions on Audit Reconsideration.  Check it out at IRS Publication 3598. Audit reconsideration is the first avenue I consider when responding to the dreaded ’90 day letter’ or IRS Notice of Statutory Deficiency. Almost 99.9% of Notices of Statutory Deficiency can be settled with the IRS unless the time clock runs down resulting in a default tax judgment if you do not file a petition in tax court.

IF you find yourself ‘running out of time’ on the 90 day period, filing a tax court petition and paying court fees and representing yourself pro-se or hiring a tax court lawyer are last choice decisions. They are costly and tax court I hate to say it usually favors the government. The best solution is to manage the IRS Examination (aka Audit), IRS Appeals, and/or IRS Collections early and often to obtain the BEST outcome.

The problem with the 90 day letter is that it is an uphill battle to get the proposed assessment amount changed. If gone unchecked the assessment will proceed to IRS Collections and Collections will assume the amount is correct. It is possible to get the matter back to IRS Examination, but the IRS does not have to comply with that request. If the amount in the 90 day letter is not correct, and you have the documentation and tax authority backing your position, IRS Examination, Appeals, and/or Collections will want to settle the case. The trouble is that by the time the average taxpayer does anything about the 90 day letter there may not be enough time left to arrive at a resolution with IRS examination. Subsequently if a tax court petition is not filed timely, the taxpayer’s options become limited and resolution becomes potentially more expensive.

All of my cases are settled in IRS Appeals before the Tax Court Hearing date. I prefer not go to Tax Court. Also you are not going to Tax Court immediately if you petition, you will go to IRS Appeals as a docketed case, and you can most likely settle it there. You should try to work it out with the IRS, but you need to be prepared that if the 88th day comes, that you will need to petition the Tax Court to preserve your rights. I’m not a lawyer but I can tell you that filing the petition in tax court is not as daunting as it sounds. The first thing the court does is send the file to IRS Appeals to be worked out and that is where I come in. The tax court petition kicks a taxpayer’s file into appeals from wherever it is in the IRS system. If you can work it out with IRS before the petition is filed, that saves the fees for filing the petition and the additional correspondence required for dealing with the IRS attorneys.

I found ALL the following works to the taxpayer’s advantage when time winds down if proper documentation and tax authority is held: file a reconsideration along with IRS Form 843 to request a refund or abatement; File an amended return Form 1040X to modify IRS assessments (or a 1040 to modify a return that the IRS may have prepared on the taxpayers behalf); Request an Appeal; or as a last resort if you are quickly approaching a time deadline, file a petition in US Tax Court

I must say though that from my own somewhat biased perspective it is much easier to get the total amount of an entire tax liability (covering multiple tax periods) established in IRS appeals where the IRS Appeals Officer can deal with the entire situation rather than spending copious amounts of time on the phone coordinating between IRS examination or IRS customer services (processing the past due or amended returns) and IRS collections for each specific tax matter and tax period.

Most anyone, be they an EA or CPA or a person with no professional training whatsoever, can assist other tax payers in tax court presuming the taxpayer with the court petition is willing to act on their own behalf. Before considering this route go to tax court and sit in that room and hear a proceeding.  This is a valuable experience to learn how the tax court actually operates. Tax court proceedings are not the same as Federal Court. I’ve found the tax court judges offer more room for parties to argue cases which I consider to be a special talent. The proceeding is usually less formal but timeliness and preparation are demanded and the tax rulings themselves have been fairly predictable.

Filing a Tax Court Petition is ultimately a great tool in buying more time to prepare the necessary documents to prove the assessment should not take place. More than likely you will have 6 months after you file the petition before you even hear from an IRS Appeals Agent.

Keep in mind that as long as you have not signed and waived your dispute rights with a ‘closing agreement’ (IRS Form 906); a ‘compromise agreement’ or an ‘appeals agreement’ (IRS Form 870-AD) with the IRS you do not have to go to tax court.  So before you SIGN ANYTHING be sure to consult with someone you trust.

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How to Prepare a Request for an Appeal of an IRS Examination – IRS Form 12203

November 30, 2010 Amended Tax Return, Appeals & Audit Resolution, Colorado Department of Revenue, IRS Appeal, IRS Audit, IRS Collections, IRS Enforcement, IRS Examination, IRS Levy, IRS Lien, IRS Mediation, IRS Penalties, IRS Penalty and Interest Abatement, Self Employ, Small Business, Social Security Tax, Statutory Notice of Deficiency, Sub-chapter S, Tax Guidance & Preparation, Tax Problems & Requests, Tax Relief

If you decide you want to present your dispute to IRS Appeals, you will need to prepare a request for Appeals and mail it to the office that sent you the decision letter. There are essentially 2 types of requests For Appealing an Examination

1.  Small Case Request – Prepare a small case request instead of a written protest if the total amount for any one tax period is $25,000 or less.  For specific guidance in preparing a small case request/protest, refer to IRS Form 12203, Request for Appeals Review. Send a letter requesting Appeals consideration. Indicate the changes you do not agree with and the reason you don’t agree.

2.  Formal Written Protest – Prepare a formal written protest for all of the following situations:

a. If the total amount for any one tax period is greater than $25,000.

b. Employee plan and exempt organization cases without regard to the dollar amount at issue.

c. Partnership and S corporation cases without regard to the dollar amount at issue.

To prepare a formal written request for Appeals you must:

1. Include your name, address, social security number, and daytime telephone number.

2. Include a statement that you want to appeal the IRS findings to the Appeals office.

3. Include a copy of the letter showing the proposed changes and findings you don’t agree with (or the date and symbols from the letter).

4. Indicate the tax periods or years involved.

5. List all the changes you do not agree with and why you don’t agree.

6. State the facts supporting your position on any issue that you do not agree with.

7. Cite the law or authority, if any, on which you are relying.

8. Sign the written protest under the penalties of perjury.

You can represent yourself in Appeals, and you may bring another person with you to support your position. If you want to be represented by someone, the person you choose to represent you must be an attorney, a certified public accountant, or an enrolled agent authorized to practice before the IRS.

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If you owe the IRS money, here are some tips …

August 9, 2010 Amended Tax Return, Appeals & Audit Resolution, Audit Reconsideration, Back Taxes Owed, Debt, Disallowed Expenses, Estate Tax, Intent To Levy, Intent To Lien, IRS Audit, IRS Collections, IRS Enforcement, IRS Examination, IRS Penalties, IRS Penalty and Interest Abatement, Paying Taxes, Statutory Notice of Deficiency, Tax Guidance & Preparation, Tax Problems & Requests, Tax Relief, Taxable Income

  1. If you get a bill this summer for late taxes, you are expected by the IRS to promptly pay the tax owed including any penalties and interest. First you should consider appealing the determination based on merit and evidence. For more information on appeals feel welcome to contact me directly at 720-234-1177 or at jddundon@comcast.net

  2. If you are unable to pay the amount due and have no basis for appeal, it is often in your best interest to get a loan to pay the bill in full rather than to make installment payments to the IRS.

  3. You can also pay the bill with your credit card. The interest rate on a credit card or bank loan may be lower than the combination of interest and penalties imposed by the Internal Revenue Code. To pay by credit card contact one of the following processing companies: Official Payments Corporation at 888-UPAY-TAX (also www.officialpayments.com/fed) or Link2Gov at 888-PAY-1040 (also www.pay1040.com) or RBS WorldPay, Inc at 888-9PAY-TAX (also www.payUSAtax.com).

  4. You can pay the balance owed by electronic funds transfer, check, money order, cashier’s check or cash. To pay using electronic funds transfer you can take advantage of the Electronic Federal Tax Payment System by calling 800-555-4477 or online at www.eftps.gov.

  5. An installment agreement may be requested if you cannot pay the liability in full. This is an agreement between you and the IRS to pay the amount due in monthly installment payments. You must first file all returns that are required and be current with estimated tax payments.

  6. If you owe $25,000 or less in combined tax, penalties and interest, you can request an installment agreement using the Online Payment Agreement application at IRS.gov.

    You can also complete and mail an IRS Form 9465, Installment Agreement Request, along with your bill in the envelope that you have received from the IRS. The IRS will inform you usually within 30 days whether your request is approved, denied, or if additional information is needed. If the amount you owe is $25,000 or less, provide the highest monthly amount you can pay with your request.

  7. You may still qualify for an installment agreement if you owe more than $25,000, but a Form 433F, Collection Information Statement, is required to be completed before an installment agreement can be considered. If your balance is over $25,000, consider your financial situation and propose the highest amount possible, as that is how the IRS will arrive at your payment amount based upon your financial information.

  8. If an agreement is approved, a one-time user fee will be charged. The user fee for a new agreement is $105 or $52 for agreements where payments are deducted directly from your bank account. For eligible individuals with incomes at or below certain levels, a reduced fee of $43 will be charged.

  9. Taxpayers who have a balance due, may want to consider changing their W-4, Employee’s Withholding Allowance Certificate, with their employer. There is a withholding calculator available on IRS.gov to help taxpayers determine the amount that should be withheld.

  10. Helpful Links:

    Publication 594, The IRS Collection Process ( PDF)

    Publication 966, Electronic Choices to Pay All Your Federal Taxes ( PDF)

    Form 9465, Installment Agreement ( PDF)

John R. Dundon, EA – 720-234-1177 – www.1040.com/jd – jddundon@comcast.net – Enrolled with the United States Department of Treasury to Practice before the IRS – Enrolled Agent # 85353. Under contract with the IRS as a Certified Individual Taxpayer Identification Number (ITIN) Acceptance Agent – I am a Federally Authorized Tax Practitioner (USC 31 Section 330 + IRC 7525a.3.A) regulated under US Treasury Cir. 230.

http://prep.1040.com/jd

http://johndundon.taxtutor.com

jddundon@comcast.net
720-234-1177

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Currently Not Collectible

April 27, 2010 Appeals & Audit Resolution, Audit Reconsideration, Back Taxes Owed, Currently Not Collectible, IRS Collections, IRS Enforcement, IRS Levy, IRS Lien, Statutory Notice of Deficiency, Sub-chapter S, Tax Fraud, Tax Guidance & Preparation, Tax Relief

Currently Not Collectible means that a taxpayer has no ability to pay his or her tax debts. The IRS can declare a taxpayer “currently not collectible,” after the IRS receives evidence that a taxpayer has no ability to pay. Such evidence is usually obtained from the taxpayer on IRS Form 433-F, Collection Information Statement. A taxpayer can request “currently not collectible” status by submitting Form 433-F to an IRS Revenue Officer or the IRS Automated Collection System unit.

Once the IRS declares a taxpayer currently not collectible, the IRS must stop all collection activities, including levies and garnishments. The IRS must send an annual statement to the taxpayer stating the amount of tax still owed. This annual statement is not a bill.

While in not collectible status, the 10-year statute of limitations on tax debt collection is still running. If the IRS cannot collect the tax within the 10-year statutory period, then the tax debts will expire.

Being declared “currently not collectible” is one of five ways to get out of tax debt. A taxpayer facing significant financial hardships or tax debt burdens should seek the advice of a tax professional specializing in tax debts.

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IRS Payment options

April 15, 2010 Appeals & Audit Resolution, Back Taxes Owed, Debt, Intent To Levy, Intent To Lien, International Tax, IRS Appeal, IRS Enforcement, IRS Levy, IRS Lien, IRS Mediation, IRS Penalties, IRS Penalty and Interest Abatement, Partial Payment Installment Agreement, Statutory Notice of Deficiency, Tax Guidance & Preparation

Filing and Paying on Time Saves MoneyIf you have a balance due and do not pay by April 15, you are subject to a failure-to-pay penalty. If you cannot complete your return and file it by April 15, you may request an extension of time to file. However, an extension of time to file is not an extension of time to pay.

If you cannot pay the full amount you owe, you will still benefit from filing your return and paying as much as you can by April 15 because interest and failure-to-pay penalties are due only on the unpaid balance.Members of the military and some others currently serving in combat zones can wait until after April 15 to file and pay. Those eligible get the extra time penalty- and interest-free without having to ask for it. Normally, the filing and payment deadline is postponed until 180 days after the service member leaves the combat zone. Victims of recent natural disasters, listed on IRS.gov, also have extra time.

Electronic Options

A number of electronic payment options are available to taxpayers. Payments can be made online, by phone using a credit or debit card or through the Electronic Federal Tax Payment System. Taxpayers who e-file their returns may use the electronic funds withdrawal option for submitting an electronic payment. It’s possible, for example, to e-file in February or March but schedule the payment for withdrawal as late as April 15.

Information on these options can be found on the Electronic Payment Options Home Page of IRS.gov. Some taxpayers who itemize may now deduct the convenience fee charged for paying individual income taxes with a credit or debit card as a miscellaneous itemized deduction. The deduction is subject to the 2-percent limit on Form 1040, Schedule A. Taxpayers may also pay any taxes by check made out to the “United States Treasury.” Include Form 1040-V, Payment Voucher, along with the payment and tax return. If you have already submitted your tax return but still need to pay all or some of the balance, you may mail the check to the IRS with Form 1040-V.Installment Agreements and Online ApplicationsIf you can’t pay in full by April 15, consider applying for an installment agreement.An installment agreement allows you to pay any remaining balance in monthly pieces. Taxpayers who owe $25,000 or less may apply electronically, using the Online Payment Agreement application. Or attach Form 9465, Installment Agreement Request, to the front of your tax return. You must show the amount of your proposed monthly payment and the date you intend to pay each month. The IRS charges $105 for setting up the agreement, or $52 if the payments are deducted directly from your bank account. Qualified lower-income taxpayers pay $43.You will be required to pay interest plus a late payment penalty on the unpaid taxes for each month or partial month after the due date.Offers in CompromiseThis filing season the IRS has given its personnel additional flexibility on offers in compromise for struggling taxpayers. For some taxpayers, an offer in compromise, an agreement between a taxpayer and the IRS that settles the taxpayer’s debt for less than the full amount owed, is a viable option.Specifically, IRS employees will be permitted to consider a taxpayer’s current income and potential for future income when deciding on an offer in compromise. Normally, the standard practice is to judge an offer amount on a taxpayer’s earnings in prior years. This new step provides greater flexibility when considering offers in compromise from the unemployed. The IRS may require that a taxpayer entering into such an offer agree to pay more if the taxpayer’s financial situation improves significantly.

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Tax Appeal Rights

April 5, 2010 Amended Tax Return, Appeals & Audit Resolution, Audit Reconsideration, Back Taxes Owed, Currently Not Collectible, FICA, Installment Agreement, Intent To Levy, Intent To Lien, IRS Appeal, IRS Audit, IRS Collections, IRS Enforcement, IRS Examination, IRS Extension Request, IRS Levy, IRS Lien, IRS Mediation, IRS Penalties, IRS Penalty and Interest Abatement, Partial Payment Installment Agreement, Paying Taxes, Payroll Tax Problems, Self Employ, Small Business, Sole Proprietor, Statutory Notice of Deficiency, Sub-chapter S, Tax Abuse, Tax Fraud, Tax Guidance & Preparation, Tax Problems & Requests

The IRS provides an appeals system for those who do not agree with the results of a tax return examination or with other adjustments to their tax liability. Here are the top seven things to know when it comes to your appeal rights.

  1. When the IRS makes an adjustment to your tax return, you will receive a report or letter explaining the proposed adjustments. This letter will also explain how to request a conference with an Appeals office should you not agree with the IRS findings on your tax return.

  2. In addition to tax return examinations, many other tax obligations can be appealed. You may also appeal penalties, interest, trust fund recovery penalties, offers in compromise, liens and levies.

  3. You are urged to be prepared with appropriate records and documentation to support your position if you request a conference with an IRS Appeals employee.

  4. Appeals conferences are informal meetings. You may represent yourself or have someone else represent you. Those allowed to represent taxpayers include attorneys, certified public accountants or individuals enrolled to practice before the IRS.

  5. The IRS Appeals Office is separate from – and independent of – the IRS office taking the action you may disagree with. The Appeals Office is the only level of administrative appeal within the agency.

  6. If you do not reach agreement with IRS Appeals or if you do not wish to appeal within the IRS, you may appeal certain actions through the courts.

  7. For further information on the appeals process, refer to Publication 5, Your Appeal Rights and How To Prepare a Protest If You Don’t Agree. This publication, along with more on IRS Appeals is available at IRS.gov.

Links:
Appeals… Resolving Tax Disputes
Tax Topic 151 – Your Appeal Rights
Publication 1, Your Rights as a Taxpayer (PDF 21K)
Publication 5, Your Appeal Rights and How to Prepare a Protest If You Don’t Agree (PDF 36K)
Publication 556, Examination of Returns, Appeal Rights and Claims for Refunds (PDF 105K)
Publication 1660, Collection Appeal Rights (PDF 31K)
Publication 3605, Fast Track Mediation (PDF 15K)

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Do you owe money to the IRS?

August 6, 2007 Appeals & Audit Resolution, Installment Agreement, Intent To Levy, Intent To Lien, IRS Appeal, IRS Audit, IRS Centralized Insolvency, IRS Collections, IRS Enforcement, IRS Examination, IRS Levy, IRS Lien, IRS Mediation, IRS Penalties, IRS Penalty and Interest Abatement, Non-filed Tax Returns, Partial Payment Installment Agreement, Paying Taxes, Statutory Notice of Deficiency, Tax Guidance & Preparation, Tax Problems & Requests, Tax Relief, Taxpayer Advocate

The vast majority of Americans get a tax refund from the IRS each spring, but what do you do if you are one of those who have received a tax bill? What do you do if you owe money to the IRS and can’t pay?

The IRS encourages you to pay the full amount of your tax liability on time. If you get a bill for late taxes you are expected to promptly pay the tax owed including any additional penalties and interest. It is often in your best interest to get a loan to pay the bill in full rather than to make installment payments to the IRS. You can also pay the bill with your credit card. The interest rate on a credit card or bank loan may be lower than the combination of interest and penalties imposed by the Internal Revenue Code.

You can pay the balance owed by credit card, electronic funds transfer, check, money order, cashier’s check, or cash. To pay by credit card contact either Official Payments Corporation at 800-2PAYTAX (also www.officialpayments.com) or Link2Gov at 888-729-1040 (also www.pay1040.com). To pay using electronic funds transfer you can take advantage of the Electronic Federal Tax Payment System (EFTPS) by calling 800-555-4477 or 800-945-8400 (also www.eftps.gov).

An installment agreement may be requested if you cannot pay the liability in full. This is an agreement between you and the IRS for the collection of the amount due in monthly installment payments. To be eligible for an installment agreement you must first file all returns that are required and be current with estimated tax payments. If you are an employer you must be current with your federal tax deposits.

If you owe $25,000 or less in combined tax, penalties, and interest, you can request an installment agreement using the web-based application, Online Payment Agreement (OPA), found on the Internet at IRS.gov. Or, you can complete and mail an IRS Form 9465, Installment Agreement Request, along with your bill in the envelope that you have received from the IRS. The IRS will inform you within 30 days whether your request is approved, denied, or if additional information is needed.

You may still qualify for an installment agreement if you owe more than $25,000, but a Form 433F, Collection Information Statement, may need to be completed.

If an agreement is approved, a one-time user fee will be charged. The user fee for a new agreement is $105 or $52 for agreements where payments are deducted directly from your bank account. For eligible individuals with incomes at or below certain levels, a reduced fee of $43 will be charged.

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7 things to know BEFORE engaging the IRS over a dispute

May 31, 2007 Appeals & Audit Resolution, Audit Reconsideration, Correspondence Audit, Intent To Levy, Intent To Lien, IRS Appeal, IRS Audit, IRS Collections, IRS Enforcement, IRS Examination, IRS Levy, IRS Lien, IRS Mediation, IRS Penalties, IRS Penalty and Interest Abatement, Non-filed Tax Returns, Offer In Compromise, Partial Payment Installment Agreement, Paying Taxes, Payroll Tax Problems, Small Business, Sole Proprietor, Statutory Notice of Deficiency, Tax Abuse, Tax Court, Tax Fraud, Tax Guidance & Preparation, Tax Problems & Requests

1. Stay compliant – file and pay taxes on time

2. IRS employees, specifically those involved with collection matters, are for the most part good and well meaning people. These people are hired and trained with the expectation that they will advocate on behalf of the IRS and the United States Treasury. This is good for the United States Treasury on many levels, particularly when flushing out tax fraud and abuse.

3. Stated another way however, the best interests of the taxpayer involved in an IRS dispute are NOT the concern of IRS Revenue Officers and/or Agents. So don’t expect any advice from IRS Revenue Officers or Agents when engaging with them over a tax dispute.

4. Fully understand what you are being accused of by the IRS before responding.

5. Stay calm. It’s not a conspiracy.

6. Get advice before responding.

7. Respond in accordance with the time frame set by the IRS. “I forgot” is NOT a valid defense.

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