Working With The IRS

“We are called as a Body of Believers to submit to authority. As such we are to submit to the rules of the IRS. The rules are set out to assist those who are attempting to comply and to encourage all of us, either willingly or not, to file and pay our just and fair taxes. Tax laws, though complicated to the layperson, are often confusing. The services of a CPA can help people navigate through the tax maze by making the complicated easier to understand.”
—Having Served Gwinnett as His CPA

Though left to our own devices we are prone to failure, by seeking and following the advice of a trusted professional we are better able to comply with tax law with the least amount of pain and aggravation. Just as in life, a preponderance of problems is self-inflicted. By not filing returns, not paying amounts owed when due, and attempting to tackle issues we do not have the skill or wisdom to adequately address, many fall prey to their own folly by a general inability to understand all of the nuances involved. The beginning of true wisdom occurs when we begin to recognize when we need others around us to guide us through our tax system.

Tax Problems

When a professional approaches a tax issue it is best to first review the reasons for the assessment. Many times during this process it is discovered that it is not a payment issue but the original returns as filed need to be amended. After the determination of a just and fair tax, one can begin to adequately assess and make arrangements for the monies due. Great care should also be taken during this time to ensure that all payments and credits have been properly applied to the balance owed, as often-complex tax situations/scenarios will require additional review and analysis to fairly determine what is truly owed.

Trust Fund Monies

In the event your business has employees or collects sales tax, the monies withheld from payroll and sales taxes collected are technically withheld “in trust.” As such they have legal exposure to both the company for payment, as well as those personally responsible parties who knew about and controlled such payments. A responsible party is generally defined as those who were most/responsible for payments that would well extend to check signers, accounts payable, officers, and financial staff. This assessment is for one personally who collected trust monies which they unduly did not remit to the appropriate taxing/legal authority. As these monies are withheld in trust, they do not belong to the company/business. Both the IRS and individual states take a very dim and stern view of all those who unduly use their money. A 100% penalty may be assessed to the responsible parties making them personally responsible for any collected and unpaid trust fund monies.

If a business is not able to pay its staff payroll taxes/remit collected sales taxes as due, it is a clear warning side that the business model is upside down. Though most times it would indicate that the margins of a business are not adequate to support the business’ present staffing levels and overhead, it could also be an indicator that the business is not properly leveraged/financed. In either case it is cause for drastic action that will most likely result in an immediate change in staffing levels and consideration to immediately close the business. As a business cannot sell itself out of a problem, these options are most always the best course.

Federal Tax Liens

Federal tax liens are filed by the Internal Revenue Service to protect their interest and to give them legal claim to property to ensure their payment. If a lien has been filed against you in error you do have the right to appeal. Some of the more common valid defenses against a lien might be that you have paid all of the taxes due, that the statute of limitations for the IRS to collect the tax has expired, or spousal defenses (that the liability is that of your spouse alone and not a community/joint liability). Otherwise after a federal or state lien has been satisfied/obligations paid, the lien will be withdrawn/released.

Installment Agreements

The IRS will work with taxpayers to pay the monies owed over time. This option requires the taxpayer to file a form requesting that a specified amount be paid monthly over time. The IRS then has to accept the plan prior to it becoming effective. Though this is a practical way to address a larger balance over time it does not stop the assessment of penalties and interest which will continue to accrue until all monies are paid in full. Thus, it is most advantageous to consider procuring the funds from other sources as these finance/carrying charges are usually much less than that of the Internal Revenue Service.

Failure to File Penalties

Failure to File Penalties are assessed in addition to normal penalties and interest for those who do not make their payment and filings on a timely basis. Please be reminded that an extension does not allow a taxpayer to pay at a later date, as income taxes are generally due and payable as they are earned. However, a situation is greatly exasperated when a taxpayer does not file their taxes on a timely basis. Thus it is financially most advantageous to file a return even if a taxpayer does not have the monies to pay a return as the monies become due.

Failure to Pay Penalties

Failure to pay penalties occur when a taxpayer, whether an individual or a business, do not meet/pay their tax obligations as they become due. These penalties are in addition to the failure to file penalties and often result in the additional cost of collection rapidly increasing the original amount due. If you can show good cause, the IRS often will work with taxpayers in the considering an abatement of these penalties.

Innocent Spouse Rules

Innocent spouse rules were initiated to protect individuals from the actions of their spouses who might have either not reported income or taken inappropriate deductions or positions that were not in compliance with tax law. There are three separate categories under which a taxpayer might qualify including Innocent Spouse Relief, Separation of Liability and Equitable Relief. IRS tax law surrounding this particular area of tax law is complicated and you will want to avail the services of a CPA who is familiar with such matters. If you qualify the IRS will grant relief from tax, interest, and penalties.

Penalty Abatement

There are a myriad of penalties that the IRS can use to encourage compliance, including information return penalties, non-filing, non-payment, estimated payment, and failure to deposit penalties. If you are assessed penalties for any reason you still have options. Both the IRS and states will work with you to address your outstanding taxes, interest, and penalties. One of the first defenses to explore is whether you have reasonable cause for your original failure to address you past returns and outstanding monies. If you are to be granted relief under these provisions you will need to be able to show that you have exercised ordinary business due diligence and care in calculating your tax obligations. You will need to be able to illustrate that obligations were generated when circumstances existed which were beyond your control contributed to the monies being owned and assessed.

Not being aware of a law is not a valid defense that can be successfully used when attempting to request penalty abatement, as you are required to be prudent in addressing your obligations and responsibilities. Our tax system is one of voluntary compliance and tax penalties are the vehicle by which the IRS uses to ensure that you are financially motivated to file and pay your taxes as they become due. The IR S’s goal is to provide a consistent and fair methodology to assessing penalties to provide civil tax penalties to ensure ones tax obligations are satisfactorily addressed.

When evaluating penalty abatement issues the IRS will consider whether or not a penalty will cause a significant hardship such as a levy might impair a taxpayer’s ability to acquire needed medical care. As well a death, serious illness, or unavoidable absence may establish reasonable cause for considering penalty abatement. However items such as forgetfulness, ignorance of the law, and making a mistake are not generally allowed as reasonable cause in evaluating penalty abatement issues.

Please be reminded that the IRS will work with you to set up an installment agreement to pay outstanding monies as well as perhaps an Offer in Compromise if you qualify.

Wage Garnishments

When taxpayers fail to respond favorably to IRS notices for outstanding balances that are overdue, the IRS has in its arsenal the ability to garnish wages. When wages are garnished the amount taken is substantial leaving the taxpayer a much-reduced net wage. Garnishments are particularly difficult for taxpayers as a result of the economic hardship caused. When a Notice of Wage Garnishment and Wage Levy is received you will want to seek the professional services of a CPA as soon as possible to address any potential remedies available.

Bank Account Levy

The IRS has at their disposal the ability to levy your bank account, taking taxes, penalties and interest out of taxpayers’ bank accounts that are outstanding and overdue. A Notice of Levy is the bane of many, as an unexpected seizure of funds frequently will leave a taxpayer without an ongoing ability to meet their obligations as they become due. Aggressively responding to such a notice or seizure is critical to resolve any unpaid taxes. Calling your CPA immediately when you first become aware of any open taxes is an essential first step in avoiding any unnecessary problems that are attendant in any collection process.

We are constantly working with clients in a various array of issues working towards resolving them by amending and filing of returns, penalty abatement, and by submitting an Offer in Compromise. Call us today to begin to get a handle on your tax issues and back to living with your peace of mind.

His CPA (A Christian CPA Firm) Offers Free Initial Consultations/Interviews offering:

• Atlanta Tax Problem Resolution & Tax Advocacy
• Atlanta IRS/GA Offer in Compromise Submission & Filing of Back Taxes
• Atlanta Installment Plans & Tax Mitigation
• Atlanta Tax Penalties, Liens, Levies, Garnishment & Seizure
• Atlanta Trust Fund Assessments, 100% Penalty and Penalty Abatement