Bonus Tip: How to handle the IRS at your front door
File All IRS Required Tax Returns On Time!
Many people do not realize that the IRS charges you a penalty of up to 25% FOR JUST FILING YOUR TAX RETURN LATE. That’s right, 25% of what you owe. This includes individual tax returns, Payroll tax returns or Corporate tax returns.
What people don’t know is that they can file ANY tax return on time and AVOID THE 25% PENALTY even if you don’t send in the money which is owed on the tax return.
Yes, of course you’ll get some ugly mail from the IRS for not sending in the money owed, but so what, you will have avoided a 25% penalty.
I COULD HAVE SAVED so many people THOUSANDS OF DOLLARS on penalties if they just knew this one thing. So, in the future no matter what is going on in your life, file all tax returns on time even if you don’t send in the money owed with the return.
Don’t Pay IRS Penalties!
The IRS has over 148 different types of penalties. And boy do they love to hand them out. The worst part is that the IRS also charges interest and additional penalties on the original penalty.
So you must try to get them reduced or completely abated to zero.
After you have decided to make a request to the IRS to “Abate Your Penalties” you must consider where and when to make the request. In my experience your chances are better in dealing with IRS Service Centers. The timing of your request depends on the type of penalty assessed against you. It always makes sense to request penalty abatement before you pay the IRS. Although, if you’ve already paid the bill, it can’t hurt to ask for a penalty abatement and refund.
These penalties can often be reduced to ZERO if you have “REASONABLE CAUSE.” What makes upREASONABLE CAUSE you ask? Well, in my experience in negotiations with the IRS, anything may qualify as long as its reasonable.
I’ve had the IRS abate penalties for medical reasons, bad accountants, ignorance of the tax laws, ex-spouses, helping to provide care for a loved one, military call-ups, fires, floods, alcoholism, drug abuse, death, and even relying on IRS advice.
Penalties can be such a high percentage of the total amount owed to the IRS; it usually makes sense to consider requesting the IRS to reduce all penalties to ZERO.
YOU MAY BE PLEASANTLY SURPRISED. YOU HAVE NOTHING TO LOSE AND THE SAVINGS COULD BE HUGE!
Payroll Taxes Not Being paid On Time
All check signers on company bank accounts can be held responsible for payroll taxes!
If you are a check signer on the company checking account, it is your responsibility to make sure all Payroll taxes are being paid to the IRS at least monthly.
Sometimes businesses get behind on payroll taxes due to cash flow problems. The penalties and interest assessed by the IRS are excessive for this type of delinquency. This problem becomes worse with IRS penalties and interest, and the total amount owed can grow by 50% to 75% in a short period of time.
If the company is now in cash flow trouble and approaching the DANGER ZONE, it may never be able to pay off the total amount owed. Each check signer may be held personally responsible for the payroll taxes. And I meaneach of the check signers listed on the bank signature card. This often includes spouses, secretaries, employees, relatives, office managers or yourself.
Before the company gets in the Danger Zone, you should get all non-essential check signers deleted from the bank signature card.
The IRS takes a very serious approach to collecting delinquent Payroll taxes and may levy or seize company assets in short order. The best advice I can give to you if you find yourself in this situation is, NOT to meet with the IRS Revenue Officer who calls or comes to the door to collect these taxes. Often, how you answer their first 5-10 questions will determine whether you stay in business and if you or others will become personally responsible for the payroll taxes. One of the most important services I offer my clients is to meet with the IRS myself. This allows my clients to concentrate on running their business and improving cash flow.
I have never had a good outcome where the client meets with the IRS Revenue Officer themselves.
Avoid IRS Audits And If You Get Audited…End It Quickly
You can avoid most IRS ADUITS by doing a couple of things.
When I say, “Don’t make your tax return look absurd.” I mean that your entire return must look reasonable. That goes for filing status, dependents, and expenses in relation to income. Our firm has represented many clients who were audited and in most cases, I could see WHY just by looking at the returns. Auditing reasons would be adding errors, deductions on the wrong lines, deductions on the wrong form, missing forms, and often messy looking handwritten forms.
Also, most of the people who get audited are SELF EMPLOYED and they have income and expenses reported on Schedule “C.”
THE MOST AUDITED FORM EVER KNOWN TO THE IRS IS SCHEDULE “C”!
Many people report losses on this schedule from their business, which causes all sorts of RED FLAGS at the IRS.
I suggest that those people who are being audited for the form SCHEDULE “C” go through the audit and then try not to file that form in the future. By not filing the FORM SCHEDULE “C” their chances of being audited in the future drop dramatically. People who receive an IRS AUDIT LETTER in the mail asking them to come in or to call for an appointment must know this secret.
YOU DON’T HAVE TO GO! YOU DON’T EVEN HAVE TO TALK TO THE AUDITOR.
As a matter of fact, going or talking to the auditor yourself is the worst thing you can do.
The Taxpayer Bill of Rights allows you to be represented by an EA who can answer questions for you and provide documentation to the IRS. I STRONGLY SUGGEST THIS APPROACH. Many taxpayers attempt to handle their own audit or hire the person who prepared the tax return to handle it for them. The reason this usually does not work out is because most tax return preparers Do Not handle IRS Audits on a daily basis. The IRS can easily intimidate them, which usually results in an unfavorable outcome.
The best way to end an IRS AUDIT with a great outcome is TO END IT THE FIRST MEETING,
Whenever our firm represents clients in IRS AUDITS, we actually perform a trial audit in our office before we ever meet with the IRS. This allows us to know which areas need more documentation or answers. When we meet with the IRS (WITHOUT OUR CLIENT), we can quickly answer the auditor’s questions, provide documents, and get to the bottom line. We always meet the IRS at their office or at ours, but NEVER at the client’s.
Our AUDIT CLIENTS are usually very happy with our results.
Don’t Pay The IRS…Cut A Deal!
The IRS does deal on taxes owed, including all penalties and interest. The requirements are rigid, but if you qualify, the results are FANTASTIC.
To qualify for a deal with the IRS, I would generally suggest that you must owe the IRS at least $20,000.00 and have very little in the way of equity in assets. Also, you must be using your monthly income to pay your necessary living expenses, and not have much or only a small amount left over to pay old taxes.
If you meet these requirements, then you owe it to yourself to explore the possibilities of paying the IRS ONLY A FEW CENTS ON THE DOLLAR FOR THE TOTAL AMOUNT OWED.
The IRS cuts these deals and get you back in the system as a current taxpayer, and to collect a few bucks on the old taxes owed. The fine print in these deals requires you to file your tax returns and pay on time for the next 5 years. If you don’t then the IRS revokes the deal and bills you for the original amount.
I’ve prepared many OFFERS IN COMPROMISE, have them ACCEPTED and enjoyed seeing the taxpayer and their families get a fresh start. If you think you may qualify, then you must consider it as the best TAX SAVING TOOL available.
If you find yourself face to face with an IRS Agent at your front door you must remember to avoid these common mistakes:
Don’t invite them into your home or business.
Don’t answer any question. No matter how innocent they sound.
Don’t provide them paperwork or documentation.
What you should do is ask the IRS for their card and the purpose of their visit.
Explain to them that your professional representative will contact them and that all future communications will go through them.
Be polite but firm. Do not let them intimidate you into talking about anything.
Your rights under the Taxpayer Bill of Rights allow you to have a Professional Representative handle your IRS negotiations.
Often taxpayers become understandably nervous and invite the IRS Agent into their home or business and start telling them all kinds of things.
DON’T DO IT!
Usually you’re helping the IRS and hurting yourself. The IRS Agent is trained to prepare a mental inventory of all assets they see in your home or business.
Wrap - up
I’ve only briefly introduced you to five secrets that will help you avoid making your IRS difficulties worse or prevent them in the future. I am always interested in listening to people’s IRS DIFFICULTIES, and offering solutions to these difficulties. I realize that your own IRS difficulties are not something you care to share with just anyone. I also realize that you’re very busy and that it’s hard to find time to help yourself. But YOU OWE IT TO YOURSELF TO TAKE ACTION and rid yourself of all IRS problems.