How to Step Up to the IRS
6 Ways that Work When Challenging a Tax Bill
An incorrect tax bill is fairly common because of the IRS reliance on automated systems. According to a recent report, 75% of all IRS audits are done by computers. In addition, the IRS uses computers to create substitutes for returns when returns are not filed.
As a result of automation, taxpayers are receiving letters in the mail from the IRS that contain bills with incorrect tax amounts. We see this in our Atlanta accounting firm on a fairly regular basis.
We meet with taxpayers who have written to the IRS about an incorrect tax assessment and they experience the frustration of their paperwork getting lost in the system. As a result, bad tax assessments go unchallenged and appeals are not made. Individual taxpayers then find themselves battling with IRS Collections for money that they do not owe. These individuals may even be subject to a tax lien, which makes it nearly impossible to get approved for a mortgage. Then come tax levies of bank accounts and garnishments of wages.
How to Challenge a Tax
Fear not! Here is our list of 6 ways that work when challenging an IRS tax bill:
1. Request for Audit Reconsideration
If the tax bill is the result of an audit, we explain the audit adjustments that we disagree with and provide supporting documentation with a request for reconsideration. New information must be presented. This only works if the tax bill has not been paid yet.
2. Doubt-as-to-Liability Offer
This is a type of Offer-in-Compromise where the taxpayer attempts to settle the tax when their is a dispute about the amount of the correct tax liability. The offer requires the presentation of documentation or other evidence to support the taxpayer’s claim.
3. Collection Due Process Appeals Hearing
A tax bill may be challenged during an appeals hearing with a Settlement Officer. The issue of liability can only be raised when the taxpayer is first allowed a Collection Due Process hearing. This could be in response to a threat to levy or the filing of a Notice of Federal Tax Lien.
4. Innocent Spouse Relief
Married spouses are allowed to file a joint tax return with their spouses. While this brings a lower tax rate, it also brings joint liability. Both spouses are equally liable for the tax on their joint return. Innocent Spouse Relief is often used in divorce situations whereby we request that the IRS adjust the tax due on a joint return by allocating the tax between the former spouses.
5. Filing an Amended Return
A request for a tax refund may be filed with amended return. An amended return may be filed within three years of when an original return was filed, or within two years of when the tax was paid, whichever is later. If the IRS does not refund the tax pursuant to the amended return within six months, the taxpayer may then file a refund litigation law suit to recover the tax paid.
Some taxes, but not all, may be discharged in bankruptcy court. In addition, bankruptcy proceedings may also be used to challenge an underlying tax liability.
Our CPA firm specializes in determining which solution is best for you. Come to our office in Atlanta to talk about back taxes, IRS and state tax matters, tax preparation, missing returns and small business accounting.
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If you have questions about a tax matter, call our Atlanta accounting firm at 678-235-5460. For more information, go to our website home page! We provide tax and accounting services to individuals and small businesses throughout Georgia.
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