If you find yourself unable to pay your federal income taxes then you have a problem...the bigger the debt the bigger the problem. For those owing $100,000 or more it's pretty much a no brainer that they need some help. After all that's a lot of money and there is probably a lot at stake with their situation, piece of mind and all. For those owing under $100,000 it becomes a little more questionable for them as to whether they need representation or not. They think they ought to be able to do for themselves. After all the IRS has much bigger fish to fry and with all the tax evaders out there they probably don't have the manpower to waste on those relatively small dollars. And the IRS, being the benevolent organization that they are, will understand their situation and be reasonable and fair about the whole thing.
Here is what taxpayers need to understand about the IRS...their use of the word fair can be found at their website in the mission statement as follows:
The IRS Mission
Provide America's taxpayers top quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.
This mission statement describes our role and the public's expectation about how we should perform that role.
In the United States, the Congress passes tax laws and requires taxpayers to comply.The taxpayer's role is to understand and meet his or her tax obligations.The IRS role is to help the large majority of compliant taxpayers with the tax law, while ensuring that the minority who are unwilling to comply pay their fair share.Anyone can go online to irs.gov and search for "mission statement" and they will find that statement exactly as itappears above at the date of this writing. While the single sentence statement itself may seem fairly benign, and that's questionable depending on who you are, the role descriptions below it cast a pretty dark shadow if you are one of those that are unwilling to comply. If you are, you can be confident that the IRS is out to make sure you pay your fair share. By the way the IRS describes voluntary compliance as "preparing an accurate return, filing it timely, and paying any tax due" in the Internal Revenue Manual, which also can be found at irs.gov and search for "internal revenue manual."
I know what you're thinking: Yea but that's not me...after all, my situation is different and I have a good reason for getting behind. I'm not unwilling to comply; I'm a victim of my circumstance. The IRS will be fair to me (remember how the IRS used the word fair regarding their role in the mission statement?) I'm not trying to scare you, o.k. maybe I am, but you should take this very seriously. It all boils down to numbers and reasons...numbers and reasons.
Speaking of numbers let me throw a few at you from the IRS's own compilation of their latest statistics found in the Internal Revenue Service Data Book for fiscal year 2010. These relate to issues revolving around tax debt and delinquencies.
Offers in compromise received 57,000 vs. offers in compromise accepted 14,000. That's a 25% acceptance rate...only 1 in 4 is accepted! Number of individual income tax penalties assessed 27,106,767 vs. number of individual income tax penalties abated 3,039,087. That's an 11% abatement rate...only 1 in 10 is abated! Now understand that these abatements can relate to any years; however the numbers are what they are. Number of notices of federal tax liens filed 1,096,376. Number of notices of levy served on third parties 3,606,818. Number of seizures 605; by the way you can go to treasury.gov and click on auctions to see that they really do seize property and auction it off to satisfy tax debt.
Now if these numbers are even the slightest bit confusing to you, hands down you need some representation (remember it all boils down to numbers and reasons). But even if they're not you should be very concerned at the least...back to the numbers and reasons.
Numbers are what they are...you add, you subtract and everything is nice and clean. However it doesn't stop there. What types of things do you include in figuring what your tax debt should be and what you propose to offer in order to settle it? Good question, so there seems to be more to the numbers part of it than just adding and subtracting. As far as the reasons go the IRS doesn't grant you tax relief just because you ask. That should be very evident in the numbers above. Furthermore if you have stuff (house, car, big screen television) and you can't pay your tax bill the IRS assumes you used their money to buy those things and fully expects you to sell them in order to pay your debt, even if this creates an inconvenience for the taxpayer. Just a side note, the IRS views an inconvenience and an actual hardship as two very different things.
Here are a couple more quotes from the Internal Revenue Manual regarding the agents' responsibility when dealing with taxpayers and their penalties: "Use each penalty case as an opportunity to educate the taxpayer, help the taxpayer understand their legal obligations and rights, assist the taxpayer in understanding their appeal rights and, in all cases, observe the taxpayers procedural rights." "Resolve each penalty case in a manner which promotes voluntary compliance." Again the IRS will not simply abate a penalty just because you simply ask. There has to be reasonable cause which prevented you from being "voluntarily compliant" in meeting your tax obligation. That reasonable cause issue is central to the success of any relief request. Again it all boils down to numbers and reasons. It may seem simple but it's not.
The IRS has years of experience and teams of people working to ensure that the taxpayer is compliant and understands their legal obligation. That being the case you need to ask yourself this question: Is it worth the risk to save a couple of thousand dollars when I go into the lions den? I assure you it is not. Whether you agree with the notion of charging someone for representation before the IRS, and whether you can afford it, is not the real question. The real question is can you afford not to?
Trace George is a Certified Public Accountant and is the Executive Vice President of Action Tax Relief headquartered in Abilene, TX. Action Tax Relief provides services to individuals who are facing tax problems with the IRS. We help the taxpayer explore their options for tax relief including penalty abatements and offers in compromise. Action tax relief is not a CPA firm but we partner with consultants and CPAs in order to assist taxpayers through the process of dealing with the IRS to resolve their tax issues, including liens, levies and garnishments.
(c) Copyright Trace George. All Rights Reserved Worldwide
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