Last month, we talked a little about what to do when the tax auditor (a/k/a IRS Agent) comes knocking on your door.
Of course, our first suggestion was and always will be to give us a call because dealing with income, estate and other tax matters is one of the places we CPAs shine. We still suggest the same course of action, but thought we might offer a glimpse at some of the resources available to you when you don’t want to call. Primarily, then, we are going to point you to a few places on the web and at the IRS.
Call us at…
Most of the time when you receive any kind of correspondence from the IRS, you will be given a number to call if you have questions or need clarification. IRS notices can sometimes be very confusing and you may not even understand what the notice is telling you. Calling the referenced number can often help clear up noncomplex questions quickly and easily and the people on the other end are generally helpful.
You may or may not get the answer you want. You may not even convince the agent you are right even when you are correct, but many times small matters can be cleared up with a telephone call.
Don’t like our conclusion?
The Internal Revenue Service, contrary to popular opinion, isn’t always hard headed. In fact, we have found that most agents tend to be like the rest of us – just trying to do the right thing. Sometimes an agent’s conclusions are right and sometimes they are wrong.
We all know what to do when an agent’s conclusions are right – pay the bill. But what do we do when the conclusions are wrong. Do we still pay the bill? Unless the bill is very small, we hope your answer is “absolutely not!” Even the IRS’ answer is no. That is why there is an appeals division within the IRS that helps settle disputes between the taxpayer and the IRS.
We know it sounds a little strange to ask the agency you are fighting with to side with you against one of their own agents, but stranger things have happened. In one true case, an agent asserted that certain payments made to a retired stockholder represented ordinary income rather than a loan or the purchase of the stockholder’s shares in a closely held company. Because of the numbers involved, the agent’s assertion would require the taxpayer to pay approximately $250,000 in tax plus a negligence penalty of $12,000 plus three to four years interest. Upon appeal, the ultimate decision by the appeals officer required a payment from the taxpayer of approximately $155,000, including interest and no negligence penalty was asserted. Well in excess of $125,000 was saved for the taxpayer.
The appeals officer objectively reviewed the case, determined both parties had grounds for argument and decided it was in the interest of both the IRS and the taxpayer to settle the matter amicably. Unlike the old saying, “In a successful negotiation both parties walk away unhappy,” both parties in this instance walked away happy.
The President isn’t the only one with a hotline!
The IRS came to the conclusion some time ago that it wasn’t always right. Who is?
As a result, it established one of the more powerful tools in the tax practitioner’s arsenal the practitioners’ hotline. We won’t go into much detail here because the hotline is designed for the tax professional to help clients. In general, a power-of-attorney must be on file for the professional to speak with the IRS about a client and the professional should have tried other means of solving the problem. This hotline has proved a great time saver for many professionals in resolving their client’s problems with the IRS.
And now, for the moment you have all waited for…
You will note the title of this article included the phrase “File 911.” That’s because there truly is an IRS Form 911. It is the form you, your representative or even an IRS agent can file when you need emergency help with the IRS.
Form 911 is a request to the Office of the Taxpayer Advocate for help with the IRS. In case you weren’t aware, you do have an advocate in the Internal Revenue Service. It is her job, and that of her staff, to help a taxpayer when the actions to be taken, or already taken, will create an undue hardship on the taxpayer.
Here is how it works.
You contact the Taxpayer Advocate. This can be done in one of several ways. You can either phone the Toll Free number at 1-877-777-4778, or you can get the address of the nearest office to you out of IRS Publication 1546
or you can file Form 911
. Whatever method you use the Taxpayer Advocate’s Office will need the following information:
- Your name, address and social security number (or taxpayer identification
- Your telephone number and the hours you can be reached,
- A detail of the previous correspondence or conversations you have had with
the IRS about the matter and who it was you spoke to, he type of tax and the
year involved, and a description of the problem or hardship created.
Once the Taxpayer Advocate has the necessary information, someone will be assigned to take a completely fresh look at your case. They will stay in contact with you until the problem is resolved and will make sure you have someone to contact at the Taxpayer Advocate office and, in general, attempt to do all that can be done to bring your case to a timely conclusion.
Note that we didn’t say you would receive a satisfactory conclusion. That’s because what you may feel is satisfactory may not be what the law provides. For example, many times the statutes allow the IRS to waive penalties, but interest payments may be absolutely required. In a very real sense abatement of interest many times would take “an Act of Congress,” not to mention the President’s signature. However, the resolution will generally be what is allowed in the law.
There have been many instances where the IRS Taxpayer Advocate has truly helped resolve outstanding cases that the taxpayer, or their representative, simply have been unable to resolve. The Taxpayer Advocate can be a powerful ally for the smallest taxpayer to the multinational corporation and should not be ignored in instances where needed.
We hope we have given you an idea of some of the resources available not only to us, but to you also. The IRS’ restructuring efforts over the past several years have resulted in many positive changes to help the taxpayer pay only the tax due and nothing more. In those instances where the amount sought by the IRS does exceed what you or we feel is required by the law, a mechanism to address the disagreement before it goes to court has been provided.
Of course, many problems are not always clear-cut. In those instances, you will need professional help in interpreting the law, we are always available to help. Give us a call when you find yourself up against the wall.
Have a great month!