People break out in cold sweat or start munching on antacid tablets as soon as they get that dreaded letter from the IRS. In fact, the IRS itself acknowledges that how intimidating the government agency can be. When individuals get a tax problem, many just want to escape from it or make the IRS get far away from them. Mistakes happen when they rush to get rid of their tax problems and this could cause much more harm to them in the long run.
This article will discuss about the five major IRS debt settlement mistakes taxpayers often make when they try to settle a debt with the Internal Revenue Service.
Mistake No.1: Not being up-to-date on tax payments
Whenever you approach the IRS to have negotiation for reducing your tax debts, the first thing the IRS will ask is "Have you been in current compliance with tax?” This means that you have to pay your taxes on a regular basis through withholding or you should make estimated tax payments and it must be up to date. Also you must have filed your tax returns up to the present year. If you are not able to comply with the tax rule, doing discussion with the IRS can become an unnerving exercise. During these times, it is best to get assistance from a tax lawyer to do the talking for you.
Mistake No.2: Thinking the IRS has your best interest
IRS employees represent the government. They work with the best interest for the federal agency and not to you. Regardless how good they may seem, their interest is to get as much money from you within the shortest period of time. Believing a revenue official is out to assist you can be a huge mistake.
Mistake No.3: Missing important information while filling forms
Many people are filling out forms 433-a, 433-b and 433-f just like filling tax return. What they need to understand is that these documents work as a great persuasive tool in reducing their tax debts. So it is crucial to get these documents done correctly.
The IRS will carefully scrutinize your financial ability to pay and future earnings potential before they agree for partial payment. So present your report with true information and never forget to include all of your expenses in the IRS financial forms or better get your documents reviewed by a tax specialist. If you overlook significant things like vital expenses, you will end up agreeing to an unaffordable plan.
Mistake No.4: Not looking at other settlement alternatives
The IRS Offer in Compromise program is certainly one tax resolution method that is getting all the publicity in recent years. While this program might work for some, it certainly does not work for all. There are several other options, like the Partial Payment Installment Agreement, that can work best on certain cases to minimize back taxes. Chapter 7 bankruptcy is another great tool for eliminating tax debts.
Like everybody, IRS employees also make mistakes. So if you disagree with any IRS action, you have the legal right to ask the IRS appeals office to look at the case. But there are time-sensitive deadlines for filing appeals. So to avoid potential adverse outcomes, it's always best to have an experienced tax lawyer handle the entire appeal process for you, from the filing process to debt settlement negotiations.
