Your Most Common Questions
Answered by Rich Tomlinson
“ Every tax situation can be resolved in a reasonable manner for the individual taxpayer.”
What types of tax problems do you handle? I’m qualified to handle most types of federal and state tax problems, including unfiled tax returns and unpaid taxes. This may involve personal income taxes, payroll taxes, business income taxes, sales taxes, and personal assessments of business taxes (trust fund recovery penalties). I generally do not work on cases involving county or property taxes.
I haven’t filed taxes for years, how can I take care of this without losing my shirt? While it’s your individual responsibility to file tax returns, the IRS does allow some leeway in which returns must be filed in order to catch up. Generally, the IRS will only require that you file tax returns for the most recent six tax years. You may be exempt from other years, provided the IRS has not assessed taxes for those years or has no evidence of tax liability. There are some years where you may even be exempt from filing depending upon the amount and nature of your income.
The IRS has already assessed taxes against me, even though I haven’t filed my taxes. Can that be fixed? Yes it can! You always have the right to file a tax return, even if the IRS has already done so on your behalf. Preparing and filing taxes is always a precursor to settling any case with the IRS. In fact, the IRS will require you to file your returns prior to working out any kind of a deal. Also, it frequently reduces the taxes and penalties owed—sometimes dramatically!
I haven’t paid my taxes for so long that I’m afraid that once the IRS finds me they’re going to take my home or car or—worse—put me in prison. Is there any hope? Yes, there is hope and, no, the IRS isn’t going to put you away. First, asset seizure happens very infrequently. In a typical year the IRS may seize only about 600 homes in the entire U.S. In all reality, if you’re having difficulty with your taxes, you probably also owe more on your home than its worth. It doesn’t do the IRS any good to seize a home where they’ll get little or nothing. Second, as far as going to prison is concerned, it’s extremely unlikely. Last year the IRS filed fewer than 3,000 criminal cases. You have to really work at getting into that type of trouble.
I know that I owe the taxes. If I make a lump sum offer can I cut a deal to pay only part of them? Unfortunately, Congress has not given the IRS the authority to ‘cut a deal’ on paying your taxes. In order to pay less than the total due, you must qualify and apply for an Offer in Compromise. However, it’s possible in many cases to request and have part or all of the penalties assessed abated. Considering that it’s possible for the IRS to assess penalties in excess of 50% of the unpaid taxes, this can be significant.
I keep seeing ads on TV promising to resolve my tax problem for ‘pennies on the dollar’. Can this be true? The IRS does have a program that might allow some people to settle their taxes for less than they owe—in some cases far less. It’s called an Offer in Compromise (or OIC). It’s an excellent program. However, it has several problems and most of the time it may not be the best option.
> First, an OIC is typically based on your ability to repay your taxes—as defined by the IRS. Only ten to fifteen percent of those individuals owing taxes even qualify for an OIC. This means that 85% to 90% do not qualify for an OIC.
> Second, the documentation to apply for an OIC is very stringent. Three-fourths of all Offers are rejected by the IRS either because they are so poorly prepared that they cannot be processed or because they have not demonstrated to the IRS’s satisfaction that the taxes cannot be paid. To get an Offer through, it’s critical that it’s properly prepared and thoroughly documented.
> Third, in those few cases where individuals are approved for an OIC they are put on probation for five years, during which time they must be in 100% compliance with all tax laws, including timely filing and payment of taxes. More than half of all accepted offers ultimately fail because of subsequent non-compliance.
If OIC’s are so difficult should I even try for one? Each case has its own set of circumstances. If after careful review there are clear indications that:
1. you qualify,
2. it’s cost effective, and
3. you can meet the probation requirements,
then by all means an OIC should be pursued. Even if you don’t think you qualify, you may have financial circumstances that can be legally rearranged to where you may qualify.
Ok. So it appears that I don’t qualify for an OIC, are there any alternatives? Absolutely! There are a number of alternatives that may work for you. These may include setting up an installment agreement, requesting a non-collectible status, disputing penalties, or even filing for bankruptcy. Other cases are best served by filing for appeals, requesting abatements or seeking innocent or injured spouse status. Each of these programs have specific requirements and the best solution can be determined only after careful review.
This is all great, but the IRS is already levying my wages or my financial accounts. Isn’t it too late? As long as you’re willing to cooperate in resolving your case, it’s never too late. Levies can almost always be either reduced or released. Congress has made some excellent tools available to us, including the Taxpayer Advocate Service. You just need to know how and when to use them.
I’ve received all kinds of mail from national firms offering to take care of my tax problem, why should I see you? Undoubtedly you’ve been inundated with letters, flyers, and phone calls from companies promising to solve your taxes once and for all. Just like me, they probably found out about your tax situation because the IRS filed a federal tax lien against you in district court.
Unfortunately, nearly all national firms use a one-size-fits-all formula and very few have sterling reputations. In fact, the largest tax resolution firm in the country recently wound up on the losing end of a law suit brought by several state attorney generals. They paid out millions of dollars in fines and restitution, and were slapped with numerous sanctions. (Just as a side note, members of ASTPS reviewed those sanctions and found that none of our current practices would have been sanctioned.) Further, these firms usually charge substantial fees even before they see or accept your case. A typical fee—sight unseen—is $3,500 to $5,000!
Tax resolution is an area that requires significant expertise. Some time ago, I worked with an attorney who toyed with specializing in this area. After trying to work at it for several months, he finally threw up his hands and walked away because it was too complex! He considered bankruptcy law—his current specialization—to be far simpler. I actually worked my first tax resolution cases while I was associated with him.
Those first cases pointed out to me just how complex the specialization was and just how little I knew. However, because I enjoyed the niche, I continued to work new cases, obtained knowledge from whatever professional source I could find, and eventually discovered the American Society of Tax Problem Solvers (ASTPS). Through their training and certification programs, I became qualified as a Certified Tax Resolution Specialist. To this day I keep this certification current through continuing education, attendance at conferences, and other regular affiliation.
No two cases are the same. Each case presents a unique set of circumstances and is best served only after I conduct a confidential and comprehensive interview and a thorough and careful evaluation of your tax and financial circumstances. Some cases can be resolved by simply filing returns, others by submission of a short form financial statement, and yet others through appeals or submission of OIC’s. Understanding your situation and knowing when to do what is the trick. It’s best handled in person—something a ‘national’ firm cannot do!
My promise to you:
If I cannot improve your circumstances by more than my fee (usually a lot more!), I will not accept your case.
What about fees? No two cases are exactly the same. The fees and the services provided are tailored to your needs. All cases start with a comprehensive interview. Additional information is obtained, including IRS transcripts, copies of tax returns, and your financial information (all of which is held extremely confidential). After a careful review of that information a course of action is proposed, including the cost. You make the decision as to how to proceed. While I typically require fees to be paid as work is performed, you are in total control of what services are provided. This approach results in fees that are nearly always lower than what the ‘nationals’ charge—without ever sacrificing the quality of work performed.
Can I afford your fees? It doesn’t matter who you go to, the resolution of nearly every case will have a cost.
> For those that go with a national firm, the fees are always high and their work is usually less than ideal. (I know of one client who was charged $60 for every phone message they left for the firm!)
> For those who do it themselves, there is usually the additional cost of a less than satisfactory solution. The IRS has a reputation for bullying taxpayers into doing more than they can afford and almost never letting you know of alternatives.
> For those who do nothing, it’s the additional cost of having the IRS pursue you relentlessly, levying paychecks and bank accounts— ruining your credit and leaving you penniless.
Now is the time to take control and resolve your tax problems.
