If your request for the First-Time Penalty abatement fails the next course of action is Reasonable Cause Penalty Abatement.
The taxpayer or Enrolled Agent would submit a written request for penalty relief based on a reasonable cause.
Even if any of these situations have occurred you could still be turned down by the IRS. In that case you would have the option of filing an appeal.
When a taxpayer owes a substantial amount of money, it is a very stressful situation. This could affect your family, marriage and friendships. Dealing with the IRS in these situations can be stressful and intimidating.
This is where Enrolled Agents come in handy. We are enrolled to practice before the IRS. We take the stress away and handle the situation for you. We understand all the available options in these situations.
You may see the famous commercials that state “pennies on the dollar.” Sounds great, doesn’t it? This is not reality. The only time that can possibly happen is if the taxpayer is insolvent.
These firms have you pay them at least $5K, insist you pay them first and not pay the IRS. They tell you they can settle your case for little or no payment. It very rarely happens that way!
You shuffle through your mail and there’s a letter from the IRS. Instinctively, you want to treat it like toxic waste — hide it and hope it goes away or hire the first person you find who promises to clean it up.
It’s important to get past that first moment of anxiety and think logically. Predatory tax resolution companies, and there are more than a few, turn that fear into a tidy profit.
Here’s how not to be suckered.
First, take a look at what the IRS wants from you. In the best possible case, it may only want some information that it believes is missing from your return. The next level is that it believes you have miscalculated your return and have underpaid. Then there are the higher levels that include penalties and audits. Here’s a link to the types of IRS notices: https://www.irs.gov/uac/newsroom/ten-things-to-know-about-irs-notices-and-letters.
In most cases, you or your tax preparer can take care of less severe problems. When it comes to more complex and more expensive issues, you might want to seek help.
Should you decide to hire a tax resolution company, make sure you do your research.
Finally, there are some phrases and actions that should set off alarm bells when you’re doing your investigation.
The most common one is that you’ll be able to settle for “pennies on the dollar.” The IRS is not that generous. While there are some “Offer in Compromise” situations that can reduce your tax bill, the statistics say it’s unlikely. The IRS accepts less than 15 percent of all OIC offers.
Be wary of “guaranteed results.” Each taxpayer’s situation is unique. And the IRS is not always predictable. No firm can guarantee you results.
Steer clear of anyone using high-pressure sales tactics. A reputable firm will understand that you need to consider your options.