Is The IRS Becoming Kinder And More Gentle?

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Many years ago, the IRS came out with this little slogan, “a kinder, gentler IRS”. The question is,  “are they”?  A grizzly bear is soft and gentle at times, yet other times kills. Which one is the IRS? Ever since this slogan came out I laughed at the kinder gentler IRS. The truth be told,  it all depends on the agent and what type of day they are having. Like any business or job, when a case is worked by an agent, it has a certain personality to it just like a grizzly.

Some of the factors that determine how your case is going to be worked are based on the type of day the agent is having and their current life circumstances. Did they just have a review? Is management pressing new issues?  This all may affect your case. Management comes out with different programs throughout the years and if it is a program your case falls under, out comes the bear. There are too many factors that determine which side of the bear will show. It is important to remember first and foremost:

The IRS is a collection agency, imposing tax liens and tax levies to secure the national interest. They are interested in getting paid. That is their goal.

The bear is always happy when you you keep his belly full, i.e., you are current on tax deposits and are responsive to appointments and requests.

The reason you hire a true tax professional is to navigate your way through the process. The professional does not owe the tax and the IRS is in a less combative mode with them. As a general rule, once the professional is involved, your lien and levy chances are much diminished.

When I was an agent, I loved working with the professional because they helped me keep my deadlines.

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Help! The IRS Is Not Listening, What Do I Do?

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What do I do when the IRS is not listening?  If the IRS is working your case and YOU know there is an impasse or a problem,  is what they say gospel? No, you have a friend called the Taxpayer Advocate. So how does this process work?  The LTA is a Local Taxpayer Advocate that  works in the area that you live. This person becomes the go between of the agent and you if there is a reason and an impasse is reached.  A 911 form must be filled out and given to the agent working the case. That form is immediately sent to the local taxpayer’s advocate office. The LTA are a good go between for you and the agent, but you MUST have a legitimate reason, no bogus stuff like you don’t like the color of the agent’s hair or the agent is unpleasant. The 911 form is designed to indicate that hardship exists and that there are causes that someone should understand. It keeps the agent on their toes if the reason is legitimate. The Advocate’s Office … Continue reading

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The IRS Is Giving Away Their Audit Techniques.

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This is big!  The IRS is actually helping the taxpayers understand their audit techniques. This was such a mystery over the years for so many people on the question, ” what does the IRS do during an audit”?  This is IRS’s way to become more people friendly. The IRS has a new program called TaxWise, a TV feature that is a guide to help navigate you through the IRS audit process. Its purpose is to show you how the IRS conducts an audit and will help the taxpayer prepare for the audit. The IRS will show you their examination techniques that are common to unique industry standards, business practices,  industry terminology and give you other information to assist you and the IRS examiner during the audit. This program is very beneficial to everyone who will ever go through an audit.  To learn about this and more, go to the IRS.gov. Basically, if you want to limit your potential liability during an audit and not have your money exposed to a potential IRS lien or levy, this will help minimize your … Continue reading

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Ordering Transcripts, Now Simpler.

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New Form Aids Processing of Mortgage Applications, Makes Ordering Tax Transcripts Simpler WASHINGTON ? The Internal Revenue Service today issued a new form to aid the processing of mortgage applications under the Home Affordable Modification Program (HAMP) as part of the Making Home Affordable Program. The new form will make it simpler for people, especially homeowners trying to modify or refinance their mortgages, to order copies of their tax return transcripts. Taxpayers often need copies of their tax return information, especially when they are obtaining a new mortgage or when they are refinancing or modifying an existing mortgage. Taxpayers can use Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript, to order a Form 1040 series tax return transcript free of charge. A transcript is a computer print-out that includes most lines on the original return. A transcript often is an acceptable substitute for a copy of the original tax return for purposes of verifying income. Form 4506T-EZ is a streamlined version of the Form 4506T, Request for Transcript of Tax Return. The Form 4506T-EZ is only for individuals … Continue reading

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Estimate Tax Penalty Abatements

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RS manual provisions state the following regarding the estimate tax penalty: Estimated Tax Penalty and Reasonable Cause The penalty for underpayment of estimated tax cannot be removed or waived for reasonable cause alone. The IRS is tough on this penalty. The penalty for underpayment of estimated tax generally is not waived as a result of disaster.  However, in the case of a Federally declared disaster area, “the Secretary may specify a period of up to 1 year that may be disregarded”  in determining whether or not estimated tax payments were paid on time. In these cases the IRS will issue a memo with specific instructions regarding the payment of estimated tax in the affected area. The sire instructions and areas of relief are found on their web site. irs.gov. Programming generally takes all special disaster area rules into consideration when computing the penalty for underpayment of estimated tax. Even when the taxpayer?s books and records are kept within the disaster area, while the taxpayer?s official address of record is not, manual adjustment of the penalty should not be required for … Continue reading

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The IRS prepared a “substitute return” and filed for me. What happens next?

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I have a tax bill and I never filed these tax returns. What are these?  They are substitutes for returns prepared by the IRS. Many times people forget to file their tax returns and the IRS finally picks up on the fact that there are no matching returns for a social security number.   What happens next is that the IRS has the authority to file for you. This is what they do. They get all the income information they need that was submitted to them by third party sources such as  banks, employers, 1099 sources, and then the IRS prepares the tax return for you. They prepare any back years they have information on. Then, the IRS gives you the standard deductions,  prepares the return and serves you notice that this is/are the returns they have prepared for you.  You can reply and change the amount of the back taxes, appeal or just do nothing. If you fail to reply, the IRS will  assess the tax liability and in a prescribed period of time, send you out notices and … Continue reading

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Relief from IRS penalties. The reasons the IRS accept, straight from the horse’s mouth, the IRS.

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Relief From Penalties Generally, relief from penalties falls into four separate categories: Reasonable Cause Statutory Exceptions Administrative Waivers Correction of Service Error Appeals may recommend the abatement or non-assertion of a penalty based on these four criteria as well as “Hazards of Litigation.” This chapter discusses each of these categories and the related criteria. Also, see LEM 20.1.1.3. In the interest of fairness, the IRS will consider requests for penalty relief received from third parties, including requests from representatives without an authorized power of attorney. While information may be accepted, NO taxpayer information may be discussed with a third party, unless a power of attorney or other acceptable authorization is secured in writing from the taxpayer. See LEM 20.1.1.3. If additional information is needed, contact the taxpayer or the taxpayer?s authorized representative. If the validity of the request is questionable, contact the taxpayer. In all cases involving third party requests for penalty relief, advise the taxpayer of the request and the action taken. 20.1.1.3.1  (02-22-2008) Reasonable Cause Reasonable cause is based on all the facts and circumstances in each situation … Continue reading

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Can Delinquent Tax Return Penalties Get abated With the Internal Revenue Service and How?

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Can delinquent tax returns penalties get abated with Internal Revenue Service and How? Many people who have not filed delinquent returns and decide to file returns all at one time face an uphill battle of getting penalties and interest abated. There is usually not a reasonable cause for a multitude of years, however there are exceptions. When clients come to us with multiple years we examine all possibilities of  abatement  reasons.  Anytime you have multiple years involved, it would be in your best interest  to consult a professional firm who has been down this road before. Remember, there must be a reasonable cause that fits a good time line of events that is true, reasonable and can be documented with affidavits. Reasonable cause can be achieved, but must be mapped out carefully. Back years and failure to file is something that IRS looks at very closely. Also know that the most important penalty to get abated is the failure to file penalty because it is usually 25% of the total tax.

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How easy is it to get the IRS to abate penalties and interest?

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How easy is it to get penalties and interest abated? That is a question that I am asked on a daily basis and there is an easy answer.  The answer is simply, ” if reasonable cause exists”.  The next question that comes from that, ” what is a reasonable cause”? There is no magic wand to wave regarding penalty abatement. The IRS is very tough on abatement because once assessed the penalty becomes taxes that are owed. The IRS makes it very difficult to abate penalties and interest and unless documented very well, most of these cases end up in appeal and then denied. Even though I am not aware of statistics available, I would say, one out of every hundred are accepted, if that. As a general rule, almost all penalties seem to get a reject letter the first time around because they are not filled out with the documentation that the IRS requires. There is an art to filling out the abatement requests. Firms that know how to do this are invaluable . So what is reasonable cause? … Continue reading

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Can penalties for the non-filing of form 990 be abated?

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Yes they can, if reasonable cause exists.  The reasonable cause should be documented and signed under penalties of perjury.  Please review the following: Failure to timely file the information return, absent reasonable cause, can give rise to a penalty under section 6652 of the code. Whether or not an organization qualifies for the reasonable cause exception to the penalty will be determined on a case-by-case basis taking into account all relevant facts and circumstances. The regulations provide that a request for abatement of penalties based on reasonable cause must be made in the form of a written statement, containing a declaration by the appropriate person that the statement is made under penalties of perjury, setting forth all the facts alleged as reasonable cause. This statement should be made as an attachment to the Form 990; please disregard the Schedule O instructions that ask for this statement to be included in Schedule O.  When requesting abatement of penalties for reasonable cause, your statement should include supporting documentation and address the following items: The reason the penalty was charged. The daily delinquency penalty … Continue reading

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