There are three main types of tax problems: those involving the Internal Revenue Service (IRS), the states (state taxes), and the sales tax (sales tax). The tax authorities’ attempts to collect taxes and audit taxpayers for compliance are expanding regularly.
If a taxpayer receives the dreaded news that his or her tax return or company is going to be audited and inspected, the first thing they should do is consult a tax expert. Similarly, if a taxpayer receives a collection letter threatening wage or bank account levy, or a tax levy notice, they should consult a tax expert to determine the best course of action. You may often choose from the following methods to fix your tax issues:
The best way to handle a tax notice is to pay the full amount shown on the notice and avoid any further interaction with the taxation body. If the tax bill is incorrect, this is usually not the best choice for the person to fix their tax situation.
If you can afford to do so, paying the exact amount of tax due is typically the best answer to your tax woes. To do so, you’ll need to coordinate with the relevant tax agency to get the imposed penalty reduced or eliminated. For a penalty reduction to be approved, there must be a justifiable explanation that was not deliberate negligence.
An Installment Agreement is a standard method of settling tax debt by dividing the total owed into monthly payments. Seek expert tax guidance since the taxation authorities will likely demand a sizable monthly payment, while tax attorneys will strive to negotiate an installment plan that you can afford without putting undue strain on your family’s finances.
If the amount proposed to settle the tax liability is more than or equal to the taxpayer’s Reasonable Collection Potential (RCP), then the taxing authority will likely accept the offer in compromise (OIC) and resolve the tax liability. RCP is calculated by the IRS, the state, or the sales tax agency utilizing financial analysis instruments such as the 433-A for individuals and the 433-B for businesses.