Getting into a fight with Uncle Sam never goes well. Just ask every country on Earth. It’s not easy to get in a financial battle with him either. The IRS is a branch of the US government solely devoted to taxing your income. It is a relentless, financially destructive force of nature.
For the most part, your IRS problems won’t be large, but in extreme cases, Uncle Sam can seize your home or garnish your wages.
You’re not helpless though. You have a few weapons of your own. Make sure you’re armed with information before you take on the IRS. Let's explore the tax dispute arsenal.
First there is the Appeal Process. If you disagree with the decision of an IRS employee you may ask for the employee’s manager to review the case. There is such a thing as human error and some people are just jerks. If you need a second opinion, get one.
If the manager is also a jerk, you have the right to file a written appeal under the Collection Appeals Program.
At the very least, this will get you a Collection Due Process Hearing where you can challenge the taxes owed determination.
Then you just have to convince the IRS that you don’t owe the taxes they claim you owe. Piece of cake.
If the IRS doesn’t agree with you, you may file a petition in US Tax Court to challenge the amount due. You’ll need a lawyer here. You are in a money dispute with the US government. Don’t bring a gun to drone warfare.
If you lose an appeal with the IRS, they are going to give you an Installment Agreement. It’s a payment plan and yes, there is interest. If the amount you owe exceeds $50,000, then you must complete IRS form 9465. This is a list of all of you assets, income and debt. At this point, you should probably batten down the hatches and prepare for rough water.
The IRS isn’t totally unreasonable. After you declare your surrender, you still have some room to negotiate. You might receive an Offer in Compromise. The IRS accepts these settlements under the same circumstances as most creditors:
1. Where there is considerable doubt that you are liable for the tax.
2. Where you might not ever be financially capable of paying the tax.
3. Where your offer is in the best interest of the IRS, possibly because of the taxpayer’s economic hardship or special circumstances.
One of the reasons you want a silver-tongued attorney here is because you need to persuade the court to accept that one or all of the above situations is applicable.
You should also get to know The Office of the Taxpayer Advocate if the IRS has been uncooperative. These are your friends on the inside. Your spies in the enemy base. The Office of the Taxpayer Advocate is an independent office within the IRS whose responsibility is to the taxpayer. If you are in dispute, they are often helpful in getting responses to requests for information or decisions on appeals.
If you are going up against the IRS you are in championship fight. If you don’t know what you are doing, you could end up in serious financial trouble. If they start applying heat, get a good lawyer in your corner right away. At the very least, they can stem the flow of blood.
You cannot escape your taxes. If you are fixing for a fight with the IRS, make sure you have a legitimate case for appeal.
If you're trying to avoid getting into it with the Taxman, the best thing you can do is ensure you're filing properly in the first place. Royal Legal Solutions can assist you with creating tax-friendly business structures and ensuring your businesses are tax-compliant. We also have relationships with experienced, qualified CPAs. Don't wait until you're already in a dispute: schedule your tax consultation today.
Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.
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