The Internal Revenue Service is one of the most intimidating organizations on the planet, especially when it claims you owe it money. However, you can take solace in knowing that you have options to dispute IRS debt. With this guide, you’ll learn how to battle the IRS in cases where you’re falsely accused of owing back taxes. Let’s get to work.
Letters from the IRS are scary even before you open them. You’re not quite sure what to expect, and nine times out of 10, the letter contains something you don’t want to read. However, reading the letters is the first step to dispute IRS debt.
When you open the letter, carefully read through every aspect and take note of which type of letter you receive. The CP notice number on the top-right or bottom-right corner of the page identifies which type of letter you have in your possession. Here are some common CP notice types:
Hopefully, you never get to the CP-1058 form, but if you do, make sure to respond promptly to avoid paying an unjust bill.
If you received a letter and are trying to dispute IRS debt, the first step is to contact the IRS directly. This is important for two reasons:
The IRS has plenty of contact numbers depending on your situation, but individuals should call 1-800-829-1040 to resolve any issues they may have.
To dispute IRS debt collections, the IRS generally recommends that you contact a tax professional instead of handling the case on your own. However, contacting the Taxpayer Advocate Service or a Local Taxpayer Clinic is another option. Both of these organizations can help you settle IRS disputes. The Taxpayer Advocate Service is a division within the IRS that ensures that you’re treated fairly during a tax dispute, while a Local Taxpayer Clinic makes sure that you’re represented if you don’t have the financial resources to dispute the IRS.
The Taxpayer Bill of Rights is the most powerful document you can read when you’re trying to dispute IRS debt. It outlines 10 rights that you have as a taxpayer, which are highly beneficial:
Armed with the Taxpayer Bill of Rights, you can formulate a plan to dispute IRS debt, know what you’re entitled to, and know what to expect during an IRS appeal.
If you find a tax collection or dispute unjust or unfair, you can request an appeal in writing with the IRS Office of Appeals. The reason for the appeal must be entirely based on the scope of tax laws and cannot be filed for reasons such as discrimination. When requesting an appeal, you must include the following:
Once you have documented this information, send it to the address listed on the Right to Appeals letter you received with your correspondence from the IRS. Do not mail this information directly to the Office of Appeals. This can cause delays in the appeal process that may put you even further behind in terms of amending the situation or coming to a settlement.
When the balance due and additional penalty totals under $25,000, you can submit a Small Case Request. To submit this request, file a Form 12203, which you can get online or by calling 1-800-829-3676.
If you’re not tax-savvy, you can elect to have a person represent you to dispute IRS debt and help with the appeals process. Representation rights fall under two categories: limited representation and unlimited representation.
Limited representation rights allow a tax professional to represent you, but only if they are the person(s) who prepared and filed a tax return on your behalf. In addition, these individuals cannot represent you during an appeal, even if they prepared your tax return. However, they can represent you in any other matters, provided that they speak to an IRS customer service representative or IRS agent.
Unlimited representation rights give a person the right to represent you in any matter regarding the IRS. Most often, these individuals are attorneys, certified public accountants (CPAs), or enrolled agents. If you’re in doubt as to whether someone qualifies as an enrolled agent, you can verify their status. To check their enrollment status, send an email to firstname.lastname@example.org and include the following:
If you’re at high risk for an audit or IRS dispute, such as a small business owner, you may especially want to verify a person’s status before hiring them to do any work.
IRS tax dispute resolution can result in no payments, but often, you may still owe a smaller balance on your tax bill. Fortunately, you have several payment options, depending on your needs and financial ability to pay. In addition, you can make some alterations to help avoid a messy tax dispute in the future.
For future reference, you may want to adjust your withholding or estimated tax on your Form W-4 or Form 1040-ES. This might mean you pay more, but you may avoid a tax dispute.
One of the best ways to avoid an IRS audit is by choosing a reputable tax preparer. Make certain that the individual has a license or other credentials that signify that they know the law and how to properly file taxes. Not only will this contribute to a correct tax return, but it may also help you avoid the lengthy process of a dispute, appeal, or court case.
If you need to dispute IRS debt, knowledge is power. However, that’s not always enough, especially if you’re going it alone. That’s where we come in. At Solvable, we have the tools you need to reduce stress and amend the situation. Read more on our website or call 855-324-1775 today for a free consultation.
*Image via Flickr by 401(K) 2013