Find resources to help you better understand IRS appeals.
Last month we discussed how to best survive an IRS tax audit. But wouldn’t it be nice to avoid the tax audit altogether? That’s the topic of this month’s blog post and in it, we’ll identify a few tips to prevent getting audited in the first place.
Continue reading “Tips for Avoiding an IRS Tax Audit”
The best way to deal with a tax audit from the IRS is to avoid it altogether. But despite your best efforts, you still might receive the dreaded (and unexpected) IRS letter in the mail (the IRS will always initiate the audit process by mailing a letter). If you’re facing an audit, here are some strategies to help you get through the audit and avoid paying the IRS any more money than you have to.
Continue reading “Surviving the Tax Audit: What You Need to Know to Protection Your Finances”
The IRS says you have unpaid taxes. You think they’re wrong, but despite your efforts to explain to them why they’re incorrect, they refuse to budge. Now you just received a notice from the IRS saying they’re going to try and collect money from you. Is there any way to formally dispute this tax bill? Yes, and one way to do so is to file an appeal. Here are some tips to increase your chances of success.
Continue reading “Five Expert Tips for Navigating the Tax Dispute Appeals Process and Coming Out on Top”
If the IRS believes you owe them money for unpaid taxes, you might grudgingly acknowledge the IRS is correct. But in situations where you disagree, you have certain legal rights to contest or dispute the IRS.
Continue reading “How to Dispute a Tax Bill from the IRS”
Unlike other debts, a tax debt is one of the hardest debts to deal with. One reason why tax debts are so debilitating is that the tax collecting entities, such as the Internal Revenue Service (IRS) and the California Franchise Tax Board (FTB), can take money directly from a taxpayer’s paycheck. This is often referred to as a wage garnishment or a wage levy.
Continue reading “How to Stop IRS and California Tax Garnishment?”
One of the hallmarks of our country is the concept of due process. This refers to following the law when a government takes action against an individual. And if there is ever a time when the government takes action against an individual, it’s when they’re taking the individual’s money.
Continue reading “Appealing an IRS Decision”
The IRS may make a number of decisions concerning a taxpayer’s taxes which a taxpayer may understandably disagree with. When this occurs, there are two primary paths a taxpayer can take to change the IRS decision: file an appeal with the IRS Office of Appeals or start a lawsuit in Tax Court. This post will focus on the appeals process.
Not every decision the IRS makes is absolute. In fact, most of the IRS’ most significant conclusions and findings are subject to potential review by a neutral examiner at the taxpayer’s request. However, not every taxpayer who disagrees with the IRS should appeal the decision. But for those that do, the following is a general overview of the appeals process.
The following is a sample list of typical IRS decisions that can be appealed:
Any dispute that deals with a legitimate tax issue, such as a legal or factual disagreement, can be appealed. What can’t be appealed are religious, constitutional, political and moral disagreements with the IRS. Also, you can’t file an appeal for the sole reason that you can’t pay the tax debt the IRS believes you owe.
In order to handle the appeals process, the IRS has set up the Office of Appeals, which is a completely separate and independent office from the IRS. The goal of the Office of Appeals is to resolve tax disputes without resorting to the courts, which can be a costly and drawn out process for both sides.
The appeals process begins after an audit or some other tax decision. Following the decision, the IRS will ask the taxpayer to either accept or appeal its decision within a particular time period, which is usually 30 days. The taxpayer has two potential methods of proceeding with an appeal.
The first method is the Small Case Request appeal. This method is only available where the taxes, penalties and interest at issue for a particular tax year add up to $25,000 or less. When making this request, the taxpayer must explain what the taxpayer disagrees with and the basis for that disagreement.
The second method is the Formal Written Protest appeal, which is required for disputes amounting to more than $25,000. In a Formal Written Protest appeal, the taxpayer must provide the following information or take the following actions:
Once the appeal is submitted, the taxpayer should hear back from the Office of Appeals within 90 days, when a conference will be scheduled. These conferences are held before a Settlement or Appeals Officer and usually fairly informal. The taxpayer can have a CPA or attorney represent them if they choose. Occasionally, the appeal can be handled over the phone or by mail.
Following the conference, the Appeals Officer will make his or her decision and try to reach a settlement with the taxpayer. These settlements commonly side with the taxpayer at least to some extent, since the Appeals Officer wants to avoid the taxpayer being unhappy with the results of the appeal and taking the case to trial.
If a settlement can’t be reached and the Appeals Officer sides with the IRS, the taxpayer has the option to further challenge the IRS in a court of law.
The appeals process is not something a taxpayer should decide to do as a knee-jerk reaction to an IRS decision the taxpayer disagrees with. There are many things to consider before initiating the appeals process. For instance, the Appeals Officer may bring up issues that the IRS auditor missed. Also, during appeals process, any interest will continue to accrue. The decision whether to appeal, as well as the appeals process, can be difficult for the typical taxpayer, so professional tax advice is highly recommended.
One of the IRS’ most powerful tools to collect a tax debt is wage garnishment. Wage garnishment is the ability to take a portion of an employee’s wages directly from his or her paycheck. Wage garnishment is a very intrusive method of collection and several ways to deal with it are discussed below.
Before the IRS can begin taking money directly from a taxpayer’s paycheck, it must go through several steps. It generally begins with written notice to the taxpayer regarding the amount of the tax debt along with any penalties and interest. Assuming the taxpayer doesn’t take suitable action in response to this first letter, the IRS will send another written notice, explaining the intent to place garnish the taxpayer’s wages.
Assuming the taxpayer still does not adequately respond within a certain period of time (typically 30 days), the IRS will start garnishing the taxpayer’s wages. The IRS does not need to get a court judgment before garnishment can begin.
The IRS will then directly contact the taxpayer’s employer and force them to deduct a portion of the taxpayer’s paycheck and send it to the IRS. The amount the IRS can garnish depends on the size of the paycheck. The law does not limit how much the IRS can garnish, but rather, how much the IRS must leave behind in each paycheck for the taxpayer. The amount the IRS must leave will depend on the taxpayer’s filing status.
The following is a list of methods for stopping or stalling wage garnishment. None of the methods will actually make the entire tax debt go away, but will allow the taxpayer to pay the outstanding tax bill using another method or buy time before wage garnishment resumes. Also, all of the below methods require any back tax returns to be filed with the IRS.
This method is idealistic, since the wage garnishment process probably wouldn’t have started if the taxpayer had enough money to pay his or her taxes. However, getting rid of the IRS debt, even if it means incurring interest charges by borrowing money, might be worth it for emotional well-being if nothing else.
An offer in compromise is a means of paying off a tax debt for less than the full amount. Taxpayers must apply for an offer in compromise and it’s up to the IRS’ discretion whether to accept it. For more information, check out our earlier offer in compromise blog post.
If a monthly installment agreement can be established where the tax debt can be paid off in three years or less, the IRS will usually agree to stop garnishing a taxpayer’s wages.
If the taxpayer can prove that the wage garnishment is creating a severe financial hardship, the garnishment can be halted until the taxpayer’s financial situation improves. The taxpayer will be required to show that the wage garnishment does not leave enough money for the taxpayer to pay for basic living expenses.
When a taxpayer changes jobs, the IRS eventually finds out, then goes through the process of contacting the new employer and re-establishing the wage garnishment. This can buy the taxpayer some time where his or her wages aren’t garnished, although it merely delays the inevitable.
This is an extreme option, given the financial repercussions to the taxpayer’s credit history and cost of filing for bankruptcy. Also, it won’t wipe out the tax debt, but it can stop the wage garnishment for a period of time.
Deciding which method is best will depend on each taxpayer’s unique circumstances. Figuring out which option to use and how to use it will almost always require the advice of a qualified tax professional.
The IRS has announced a new appeals process to begin September 2nd, which hopefully will benefit taxpayers trying to settle their cases. At the 2014 IRS Nationwide Tax Forum in August, it was announced that “the focus is going to be on settling cases” and that “the Appeals staff will not raise new issues.” The stated goal is to enhance customer perceptions of a fair, impartial, and independent Office of Appeals.