1. I received a letter from the IRS that shows a balance due instead of the refund that I was expecting…what can I do?
Read the notice complete and carefully, the letter will explain if the change on your return is due to an increase in income reported by others that you did not include in your return, or the IRS has disallowed any credits claimed in your return.
2. Why did I get audited?
The IRS selects some returns for examination or audit. They examine returns to determine if income, expenses, and credits are reported accurately. Having your return selected for examination doesn’t suggest you made an error or were dishonest, but it might require that you have someone to represent you before the IRS.
3. Who can represent me before the IRS?
You have the right to represent yourself before the IRS. You may also authorize someone to represent you before the IRS in connection with a federal tax matter. This authorization is called Power of Attorney.
With Power of Attorney, the authorized person can:
- Represent, advocate, negotiate and sign on your behalf,
- Argue facts and the application of law,
- Receive your tax information for the matters and tax years/periods you specify, and
- Receive copies of IRS notices and communications if you choose.
4. Who You Can Authorize
Your representative must be an individual eligible to practice before the IRS. This includes:
Attorneys, certified public accountants (CPAs) and enrolled agents (EA)
Enrolled retirement plan agents and enrolled actuaries with respect to Internal Revenue Code sections described in Circular 230
Unenrolled return preparers, family members, employees and students under special and limited circumstances.
5. I do not want to get audited by the IRS or State, what should I do?
Disclose: When there is anything iffy or questionable on your tax return, or anything that is unusual, simply include the explanation.
Document: Keep copies of all documents that back up your income and expense information.
6. I have not filed my taxes in years… I want to get in compliance but don’t have all the documents, what can I do?
Worse than not paying your taxes is not filing your return, it’s against the law. If you do not have all your tax documents, you can request a copy of your tax documents filed by others to the IRS (employers, mortgage companies, etc.).
7. If I can’t afford to pay my taxes… is there anything I can do?
Yes, if you owe to the IRS, you will get penalties and interest on top of the amount you owe; it’s in your best interest to enter into a contract with the IRS to pay your tax liability.
8. I have heard of paying less than what you owe to the IRS, is that possible?
One of the few options available for settling tax debt is an IRS program called an Offer in Compromise, or OIC.
The IRS has rules about who is eligible to apply, as well as regarding what is needed to qualify.
In order for your application to be accepted, you must make sure that you meet the following criteria:
- Answer all the questions on the forms
- Be current in filing your tax returns
- Submit the $205 application fee or successfully had it waived
- Have submitted all of your estimated tax payments for the current year
- Must not be in the midst of a bankruptcy proceeding
- Your case cannot have been sent to the Justice Department by the IRS.
9. I had a business that is closed now but I owe Payroll Taxes to the IRS, will I have to pay?
Yes, because the money you owe them for payroll taxes has already been deducted from your employee’s paychecks for withholding purposes, it’s not your money. The IRS has entrusted you to hold this amount, on behalf of your employees, and pay it over to the IRS when you issue paychecks. The IRS will go after you personally.
10. Is it legal for the IRS to take the money from my bank account, money from my paycheck?
Yes, the IRS can take money from your bank account and your paycheck if you owe taxes and have failed to respond to the notices.
11. What are my options to resolve my tax debt?
It depends on the amount you owe, the ability you have to pay, and any circumstances that may affect your ability to pay.
12. Do I have to report virtual currency transactions?
Yes, the sale or exchange of convertible virtual currency, or the use of convertible virtual currency to pay for goods or services in a real-world economy transaction, has tax consequences that may result in a tax liability.