Thursday, May 15, 2014

How to Screw Up Your IRS Issue

Here are a couple of things not to do when confronted with an IRS issue:

1. Ignore all those certified letters. Certified letters are the IRS' way of slapping you in the face to get your attention. Continue to ignore those letters and you're sure to anger the IRS. If your looking for a levy or garnishment, then you're headed in the right direction. 

2. My accountant/lawyer/spouse/ etc  is responsible for filing my returns. Responsibility for filing returns rests squarely on you - not your spouse, not you accountant, not your lawyer or anyone else. Blame has no role in solving your tax issue. 

3. The IRS owes me money, so I won't file. Great strategy, until you realize that the limitations period will run and you will lose that refund. And you know the movie script here - you have several years of taxes due that could be wiped out by a refund you did not claim 6 years ago. Just like any 70's disaster movie you lose. You lose the refund and you owe the tax due for the recent years. The IRS writes the rules here and they're written in their favor, not yours. 

4. I'll settle my debt with one cash payment, at a discount. This is clearly the biggest misconception around right now. Its a real slap in the face - the IRS doesn't negotiate or haggle. The amount due is the amount due. The IRS grants about 10 -15% of Offers in Compromise, and you need to be flat broke and have no job to qualify for the OIC. The IRS is not in the business of settling debts on a percentage basis. 

Have questions about your tax situation? Contact Austin tax attorney Martin Cantu