That depends on your ability and mental
fortitude to deal with the Internal Revenue Service agent. Most agents are fair,
especially since the Senate hearings on Internal Revenue Service abuses in 1998.
However, sometimes they can be difficult, confusing and frustrating. There are
many laws, regulations, procedures, forms, court decisions, etc. that affect how people deal and
negotiate with the Internal Revenue Service. There is a lot of information to
digest to make sure you’re not taken advantage of and avoid the pitfalls.
In dealing with the Internal Revenue Service
there are many traps to avoid and options to take advantage of. There are no
tricks or magic. Knowledge is
power.
The agent’s job is to collect the taxes
you owe in the quickest manner possible. They will request complete financial
information from you before they will consider any negotiations. They will
expect you to pay the tax immediately with any cash and liquid accounts you have
(including IRA’s and other retirements accounts). If that’s not enough to pay the tax bill, next they will
look at any assets/property you own that can reasonably be sold to generate cash
to pay your taxes.
If your liquid accounts and assets don’t
generate enough to pay the taxes, they will look at your ability to make monthly
payments.
However,
there are options. Rather than cashing out your liquid accounts or selling off
assets you have accumulated over your life, you can request a Streamlined Installment
Agreement if you owe less than $25,000 and you can propose to make
monthly payments that will pay the tax bill with 5 yrs (60 months). E.g. if you
owed $25,000 you would have to pay at least $500 per month to cover accruing
interest and penalties.
If you can’t make payments under the
automatic installment agreement conditions, you can negotiate other payment
terms. For that the IRS will require that you make a full financial disclosure
and they will closely scrutinize your financial profile. They
will take into account all your sources of income (including sources not
typically subject to income taxes or otherwise exempt), then dictate what expenses are allowable for
you based on their Bureau of Labor Statistics Living Standards. (These Standards
are used in Bankruptcy also.) Whatever is left over is what they expect you to
pay. Some people feel that the Standards are generous, others feel it’s
stingy. That depends on your life style. This may be an area where you want to
seek professional help. There are many traps to avoid, and options you can use
that you may not be aware of.
If your tax debt is large and you are in
poor financial condition, you may consider an ‘Offer
in Compromise.’ In an Offer in Compromise you can settle tax debt
for less than you owe. Pennies on the dollar.
If you had extenuating circumstances, you
may qualify for an abatement
to reduce penalties and interest.
Think you may need help? Contact us for a free
reply.
Professional
Fees
Apart from our on-line help -
You can find a range from $25 to $500 per hour. Obviously the lowest rate is not
the best, nor is the highest. Sometimes the old adage 'you get what you pay
for' applies. You need to hire a tax professional who can get the job done
for you.
You want someone with experience. You wouldn't ask your podiatrist to perform
your heart surgery.
Sample
Professional Fees for Representation:
- $250 per hour
- $125 per hour for para-professional time
It's unpleasant to quote hourly fees because
people just see the clock ticking every time work is done. Here are some typical
total costs for projects. These are based on normal circumstances. Any
complexities or issues may add to the costs:
-
Individual Streamlined
Installment Agreement $2,000
- Individual Standard Installment
Agreement $3,000
- Business Installment Agreement
$5,000
- Individual Offer in Compromise
$4,000
- Business
Offer in Compromise $5,000
Other types of tax services are impossible
to give a ball park cost on because of the variables in each case.
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