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Category Archives: Balance

IRS Math Error Adjustments -The Debate and Your Rights

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A report from the Treasury Inspector General for Tax Administration published earlier this month gives an unfavorable evaluation of the timeliness and accuracy of IRS responses to taxpayer complaints about math adjustments. The IRS has the authority to adjust taxpayer returns for over 400 math error conditions. These conditions, which can be adjusted by the IRS without performing an audit, include arithmetic errors, missing documentation and missing or incorrect social security numbers, among other things. A taxpayer can accept or reject a math error adjustment once they have received an official IRS Notice informing them that one exists.

The complaint highlighted in the recent TIGTA report is that taxpayers who dispute math adjustments often experience delays in receiving a response form the IRS. Such delays either result in the taxpayer not receiving benefits to which they are entitled or a loss of revenue to the federal government, depending on how the appeal is decided. Since both of these results are negative to one of the parties involved, TIGTA has made recommendations to the IRS to remedy the situation. In response to the TIGTA suggestions, the IRS has agreed to make their responses to taxpayer math error disputes more thorough and accurate. They did not, however, agree to the other TIGTA requests which were to monitor the timeliness of their responses and to prioritize the responses related to earned income.

The most important thing to take away from this is that if you revieve an official notice from the IRS regarding a math error adjustment, you should not ignore it. The professional help of a qualified Certified Public Accountant to evaluate your options in dermining your responce to this notification is often well worth the investment.

Click the “Learn More Link” or Call (949) 596-4143 to have one of our CPA’s provide a Free IRS or State Tax Notice Review and Consultation.

He Owed the IRS $80,000 in Back Taxes. We Reduced His Tax Debt to Zero!

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Steve H. came to Professional Tax Resolution after receiving notice of a wage garnishment from his largest customer.  Steve, a technology consultant, had failed to file tax returns for six years and, according to IRS calculations, owed over $80,000 in back taxes, penalties and interest.  Tax settlement plans for taxpayers with numerous un-filed tax returns always begin with gathering the records necessary to prepare the un-filed tax returns. In this case, the taxpayer was able to gather some information from banking records and some from customers for which he had provided services. Fortunately for this taxpayer, his wife had worked for several years and had had federal and state taxes deducted from her paycheck. We were able to obtain and verify additional tax information by obtaining IRS wage and income transcripts.

After gathering all possible relevant information, we were able to prepare all of the outstanding tax returns.  While balances were due in some years, refunds were owed in others. We were able to request that the IRS apply refunds owed to years where balances were due such that the net result was an outstanding tax liability of zero. It is never advisable to wait for a wage garnishment, tax lien or tax levy to resolve an outstanding tax issue. However, even when a tax issue seems practically unsolvable, there are tax resolution options available.  Professional Tax Resolution always looks at all available tax settlement options and provides a tax debt resolution plan for even the most complicated cases.

Amazing Tax Settlement – $1,600,000 Tax Debt Reduced to Zero!

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Karen M. was recently divorced and owed the IRS over $1,600,000 for a joint IRS liability she had incurred with her ex-husband.  The debt had accumulated over many years and, as is usually the case, included a significant dollar amount of assessed penalties and interest. The taxpayer was newly single, lived on a modest income and had no possibility of settling the debt owed to the IRS. After looking at the taxpayer’s situation and all of the available tax settlement alternatives, we determined that filing for Innocent Spouse Relief gave the taxpayer the most realistic chance of one day being free of the tax debt.

Innocent Spouse Relief provides a taxpayer relief from tax debt if their spouse or former spouse failed to report income, reported income improperly or claimed improper deductions or credits.  While the benefits from obtaining this tax settlement option can be significant, it is usually difficult to obtain. Generally, a taxpayer requesting Innocent Spouse Relief must claim and document that he or she had no knowledge of the unreported income and did not receive the benefits of that income.

In the case of Karen M., we were able to provide documentation demonstrating that our client had no knowledge of the unreported income and had limited involvement in the financial matters of the family. We were also able to prove that she did not receive the benefits of the income that was never reported and that the non-innocent spouse had a history of hiding income from both her and the IRS.

Professional Tax Resolution and the taxpayer were thrilled when a letter was received from the IRS indicating that the Innocent Spouse filing was accepted and that the $1,600,000 tax debt was reduced to zero.  This is another good example of why CPAs, Enrolled Agents, and Attorneys are often so passionate about what they do.  In most cases there are tax settlement options available even in the most complicated situations.

Complicated Tax Settlements and Returns Are Our Specialty. We Found This Client $75,000!

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There are many types of accounting, tax and tax settlement service providers. CPAs and accounting firms typically provide tax preparation services to businesses and individuals but rarely devote much effort to actual tax settlements. On the other hand, tax resolution and tax settlement firms focus mostly on settling outstanding tax debt without ensuring that all available tax code benefits have been used on the original tax filings. Professional Tax Resolution combines the expertise of tax settlement professionals and experienced, licensed tax preparers. The first step in any tax settlement case should be to confirm that the reported tax liability is correct and that all available tax code benefits have been utilized. Following that, a tax debt resolution plan can be mapped out.

Jeff F. came to us shortly before the April 15th filing deadline. A successful chiropractor, Jeff had made large tax payments for himself and his corporation for many years. However, he owed a large tax liability for the previous year and had failed to make estimated tax payments for the current year. We told Jeff that we would be happy to prepare his individual and corporate tax returns and suggest a tax settlement option for the balances owed. Although his original tax filings had been prepared by two well established CPA firms, we suggested that we would review them prior to recommending a tax settlement plan just to confirm that the balances owed were correct and that no tax code benefits had been missed.

After reviewing the most recent returns, it appeared that, as expected, the returns had been filed properly. However, one important tax benefit had been overlooked. Jeff’s business is located within an Enterprise Zone that offers specific state tax benefits for companies located within the zone. One of the benefits is a state hiring credit made available to employers meeting certain specific criteria. Companies who qualify but have failed to claim this credit are permitted to amend returns and claim missed credits providing the returns are filed within the statutory amendment period. The vouchering process to obtain these credits is fairly involved and takes several months to complete but we determined that the potential tax benefits were worth the time and expense.

After several months of reviewing employee qualifications we were able to obtain qualifying vouchers and identify over $75,000 in unclaimed state tax credits for prior year’s tax returns. The best news was that the returns fell within the statutory amendment period so the refunds could still be claimed. In addition, the credits would apply to subsequent years so the client would be able to claim as much as $15,000 in tax credits for each year going forward. While these refunds only applied to state tax balances, the client was able to use the past refunds to pay outstanding IRS balances.

Complicated tax settlements are what we do at Professional Tax Resolution. This is yet another example of how a qualified tax settlement firm can provide real solutions to taxpayers faced with a significant amount of IRS tax debt.

IRS Debt – How did that happen? Now what do I do?

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Incurring an IRS Debt

Most people who have IRS debt do not find themselves in that situation due to an unwillingness to pay their fair share of taxes. It is much more common that taxpayers find themselves owing the IRS either due to a mistake on a previously filed income tax return or some unavoidable circumstance such as a lost job, a decrease in earned income or an illness. While the initial IRS debt may have been the result of an unfortunate turn of events or a simple mistake or unreported item, it has often been compounded over time by the addition further taxes, penalties and interest. It is not uncommon for penalties and interest, which are often applied retroactively when the IRS or state tax agency makes an adjustment to a return from a prior year, to account for as much as 50% of an outstanding IRS debt balance. 

Resolving an IRS Debt

The first and most important thing that a taxpayer should do to resolve an IRS debt is to stop avoiding the issue. Taxpayers often think they can simply ignore their IRS debt because collection efforts begin mildly with letters simply stating the outstanding balance. Generally, the IRS has 10 years from the date a tax return is filed to collect an IRS debt. While collection efforts begin with passive techniques such as sending an IRS letter or IRS notice, as the 10 year collection period progresses, the methods get more aggressive. Collection attempts eventually lead to the possibility of filing a lax levy on bank accounts, wage garnishments or the filing of a tax lien. Any of these actions can have a drastic effect on a taxpayer’s credit rating and financial wellbeing. When faced with an IRS debt, a taxpayer may be best served by contacting a tax settlement professional to help resolve the issue.

How a Tax Debt Settlement Firm Can Help

The most obvious way to avoid an escalating IRS debt is to not incur the debt in the first place. While this may seem obvious, it is easier said than done. Mistakes are made and life events occur that are sometimes unavoidable. However once an IRS debt is incurred, it may be a good investment to enlist the help of a qualified professional to resolve the issue. Without professional help, individuals often find themselves overwhelmed by the barrage of letters from the IRS and confusion over how to proceed.

Why Professional Tax Resolution is a Good Choice

There are many different types of tax settlement firms and some, unfortunately, make promises they can’t keep and resort to unethical practices. For this reason, it important to research a potential tax resolution firm in order to select one that is reputable and has had a history of success settling IRS debt issues. To insure that a firm meets these qualifications, it is a good idea to verify their current licensure with the state certification agency and the Better Business Bureau. It is also advisable to review references if any are available. At Professional Tax Resolution, we encourage you to check our licenses, memberships and reviews. Our licensed CPAs and Enrolled Agents represent our clients before the IRS and State agency from start to finish. We work with our clients to prepare all un-filed tax returns, confirm and correct balances as reported by the IRS and provide our clients with the best tax settlement option available.