IRS Tax Problem - These Are Three Words You Never Wish to Hear About Your Return

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The words IRS, tax and problem are a fearful set of words that no American wishes to hear about when it is referring to their income tax return. There is more sympathy found from a financial institution when you cannot pay back a loan on time.

There are many resources that a tax payer can utilize to resolve any problem they have with the IRS, but they all cost a great deal of money. The IRS is the only place where government employees are diligent about their work. Not even the president is safe from their scrutiny.

If you owe the IRS any amount, rest assured they will find a way to get it out of you. This includes taking all of your possessions and even the possibility of imprisoning you. That is exactly how much power they legally have. This is nothing short of the old debtor's prison from Europe.

Recently, there has been an advertising campaign attempting to give a new, kinder, and gentler face to the IRS. While on the surface it all appears to be on the up and up. But now we return to reality and they still have the power to place you in prison or garnish your wages if you do not pay what they say you owe them. This last year saw the first individual defeat the IRS in court.

This odyssey began when Ms. Singleton filed her 2005 return in 2006 and deducted expenses she incurred to attend college on her way to obtaining her master's degree. She was one of the lucky 10% that defeated the IRS in 2009. 90% of Americans and companies that challenge the IRS in court with their IRS tax problem lose.

Of course, the above is not legal or accounting advice -- it is for informational purposes only. Before making any decisions regarding legal or tax matters, it is vital that you consult a licensed professional lawyer or tax accountant.

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The Automated Collection System of the IRS - Efficient?

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What is the Automated Collection System? The Automated Collection System (ACS) handles Integrated Data Retrieval System (IDRS) balance due and non-filer cases requiring telephone communication for resolution. Simply put, the ACS is a computerized network which communicates with taxpayers who owe money to the IRS, which is a big IRS problem.

Data stored in the ACS include taxpayer and audit details. With its creation in the 1980s, the chance to provide notices, examine cases, and communicate with delinquent taxpayers are made available to taxpayer examiners.

By contacting creditors and collecting court records, corporate files, and bank statements, the ACS supports every piece of information uploaded to it. Checks for validity and consistency are integrated into the system.

Is the Automated Collection System utilized by the IRS an effective method to collect taxes owed? Recently, a congressional hearing was held to decide if ACS or privatization was the most efficient and effective method of collecting taxes.

It's argued by consumer tax advocates and enemies of privatization that ACS is much less costly. Nina Olsen, the IRS's National Taxpayer Advocate, compared the expenses of running private outsourced collections vs. ACS. The cost to use the private collection program is about $12 million every year, including private collectors' commissions (which can be up to 24% of the amount they collect). These collectors are projected to bring in a measly $23 million in 2008, resulting in net revenues of only $11 million.

With no commissions and just $7 million in investment, on the other hand, revenues of $91.8 million to $145 million are brought in by the ACS. This is more cost effective, as opposed to the $81 million that the government spends each year on the privatization of collections.

The IRS says that it cannot afford to employ more officers for debt collection, that's why it outsources. To determine which is a more efficient method, however, they're regaining control of a few cases and addressing them in-house.

Colleen Kelley, the president of the National Treasury Employees Union (NTEU), testified at the hearing: "There has been no question from the outset that using private companies to collect taxes is far more costly than having trained, accountable IRS employees perform this work and poses a severe and unnecessary risk to taxpayers' sensitive and personal information."

Kelley also stresses that IRS employees are the most cost effective tax collectors in the United States, costing only 40 cents for every $100 collected. There's no necessity to utilize private debt collection with such a resource.

Utilizing the ACS is more cost effective, compared to private debt collection. Through the work of IRS employees, the government has the chance to recoup revenues.

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Choosing a Tax Professional For An IRS Problem Case - Isn't Just Any Old Accountant Good Enough?

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Tax professionals come in many forms. They can be attorneys, CPAs, or Enrolled Agents. No matter which professional you choose, you will want someone with the knowledge and experience needed to help you make good decisions regarding your finances.

What's the Difference?

Tax attorneys are lawyers who specialize in complex tax and estate matters, IRS dispute resolution, and complex tax return preparation. They should have either a tax law degree or be certified as a tax law specialist.

CPAs are accountants with college degrees and experience with a CPA firm. They prepare tax returns, do accounting, and audit work. They are licensed and regulated in all states. It will depend on the training and experience the CPA has received as to whether they will be able to deal with the IRS comfortably.

Enrolled Agents are fulltime tax advisors and tax preparers. They are licensed to practice before the IRS. They have either passed an IRS exam or have five or more years of IRS work experience. They are not able to represent you in tax court.

A good tax professional will know about the laws that govern the IRS and its many facets. They will keep up-to-date on the many changes in tax laws. They will have experience with the resolution of tax debts, with dealing with the IRS, and with IRS collections.

How to Find a Good Tax Professional

o Personal referrals

o Tax preparer recommendation

o Prepaid legal plans

o Audit assistance or preparer guarantee

o Advertising

o Professional associations

o Direct solicitation

Questions to Ask a Tax Professional

o Are you an attorney, CPA or Enrolled Agent?

o What licenses do you have?

o How long have you been in practice?

o How many clients do you handle?

o Do you have IRS experience?

o What are your fees?

o Does your fee include preparing IRS forms, documentation backup, and negotiating with the IRS?

o Do you provide a written fee agreement?

o Do you provide monthly itemized statements?

o Do you specialize in tax issues?

o Do you think you can handle my tax situation?

o Do you perform your work personally?

o What is your privacy policy?

You should feel comfortable with your tax professional. You should be able to communicate with them. You should feel confident that they would do their best for you. You should trust them.

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IRS Problems - Tax Levy

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You may receive a notice of a tax levy if you need to pay back taxes. The tax debt you owe can be collected through the levy. Your properties will be seized through the tax levy.

These things need to occur before the IRS can seize your assets: 1) a Notice of Demand for payment is received; 2) refusal to pay; 3) thirty days prior to the levy, you receive a Final Notice of Intent to Levy.

Included as assets that may be seized:

Inheritances
Interest in partnerships
Social Security benefits
Bank accounts, both checking and savings
Your house, vehicle and/or boat
Life insurance
Your income which includes both salary and commissions if applicable
Accounts receivable, contracts, and securities
State income tax refunds
Retirement pensions

Seizure of your properties and a tax levy will be emotionally and financially burdensome to your family, as if IRS problems are not difficult enough.

With the assistance of a capable IRS Problem Resolution professional, you can start to solve your IRS issues today. It's necessary to reply to a tax levy notice. A tax levy can be released and your IRS issues can be solved through many options. The options are:

Settlement of your taxes including the interest accrued and any penalties
Expiration of the statute of limitations
If levy is released, taxes can be collected
An installment agreement is negotiated upon
Dire hardship if levied
Assets levied are proven to be more than what you owe, so part of it will be released
Filing bankruptcy
Offer in Compromise

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