People get in tax debt over their heads and seek a tax debt settlement for a number of reasons.  Some people fail to file tax returns.  If you don’t file tax returns, the IRS will compute your tax for you and assess it to you along with interest and penalties.  The tax assessed will probably be higher than your real tax liability since the IRS will likely leave out a number of deductions and credits that they don’t have complete information about.  If you have not filed for a number of years and have not had tax withheld or paid along the way, you could be looking at a very large tax liability once the IRS catches up to you.         

IRS Tax Audit

Even if you do file your tax return and pay your taxes on time, your return could still be audited and you could have additional taxes imposed.  Failure to pay these additional taxes would initiate the collections process and you could potentially have to deal with an IRS tax lien, IRS tax levy, and other lousy IRS tax problems.

When you file your tax return, your numbers are compared to the figures on similar returns.  An IRS agent will then review the return and decide whether to accept the return as it has been filed, or not.  If the agent notices some suspicious items on the return, the auditor will make a note of the questionable items and then send the return to an examining group, where the return will again be reviewed by a manager.  The manager may accept the return as filed or assign it to an auditor, who will do his own review, and then decide whether to accept the return or schedule an appointment with the taxpayer. 

Types of IRS Tax Audits

Some audits are merely correspondence audits, and may be conducted entirely through mail.  In such case, the taxpayer will receive a letter from the IRS requesting additional details or support regarding certain items on a previously filed tax return.  Other audits are in-person audits held either at your business site or at a local IRS office.

Statute of Limitations

Generally the IRS may review returns that have been filed within the last three years, but this can be increased to six years or even longer if a significant error is noted or fraud is suspected.

There is also a statute of limitation regarding refunds.  Normally, if a taxpayer is due a refund, the taxpayer must claim it within three years of the due date of the tax return or risk losing it.  Filing timely tax returns will prevent this from happening.

Tax Debt Settlement

The IRS has a program to settle some taxpayer debts for much less than what the taxpayer owes in certain circumstances.  A tax debt settlement, or Offer in Compromise, is an agreement where the taxpayer is formally forgiven of all of his or her remaining tax debts.  This makes reaching a tax debt settlement the goal of many taxpayers who have IRS tax problems.     

IRS Tax Laywer

Depending on your situation, you may need an IRS tax lawyer to represent you if you plan to pursue a tax debt settlement or if any of the following situations apply to you:

  • You are being audited by the IRS and need professional assistance
  • You will be going to the US Tax Court to argue your case
  • You need back taxes help
  • You want to appeal an IRS decision

Many taxpayers hoping to receive a tax debt settlement mistakenly believe that the IRS has complete authority to do whatever it wishes and that they have no rights as an individual.  That is false, even though the IRS may act that way.  Taxpayers do have rights, and Federal laws set bounds as to what the IRS can and cannot do.  Unfortunately, most taxpayers do not know what their rights are, and the IRS does not go out of its way to explain those rights to people.  Their one and only goal is to get the money it is owed, rather than serve or help you in any way.

An IRS tax attorney can tell you what your rights are, remind the IRS of what it can and can’t do, tell you what all of your options are, push gray areas to your advantage, and attempt to negotiate a tax debt settlement on your behalf.  In fact, they can handle the tax debt settlement and everything else for you so that you never have to meet with the IRS, which keeps you on the right side of the law and can help make it a less stressful process.  Trying to get a tax debt settlement without the help of an IRS tax attorney might not be impossible, but it will put you at a significant disadvantage.  Can you diagnose your illness when you get sick or fix your car when it breaks down?  Possibly, but you likely won’t be able to do it as well as someone that does it for a living and has done it a thousand times.   

This is especially true when pursuing a tax debt settlement since many are denied.  An experienced IRS tax lawyer will be able to tell you if you would be a good candidate for a tax debt settlement, help you decide an appropriate amount to offer, and do all negotiations with the IRS on your behalf.