Colorado Springs: The IRS is Charging Me a Penalty. How Can I Get the Penalty Abated?

The IRS charging you a penalty?  Did you file your tax return late? Did you not pay your federal income tax on time?  Did you fail to pay your taxes at all?  If you answered 'yes' to any or all of these questions, then do not be surprised if the IRS is charging you a penalty.  The Internal Revenue Code Section 6694 allows the IRS to charge penalties for taking unreasonable positions, reckless conduct, and/or willful conduct.

When the IRS charges a penalty, what options are available?  Taxpayers can request and receive penalty abatement or removal of penalties under conditions.  Consulting with an Enrolled Agent, (EA) is wise to help you navigate through the process of obtaining penalty abatement.

What are the types of Penalty Abatement?

1. First-Time Penalty Abatement (FTA): Available to taxpayers who have a clean compliance history for the past three years and have not previously requested penalty abatement

2. Reasonable Cause Abatement: If you can demonstrate that your failure to comply was due to circumstances beyond your control, such as natural disasters, serious illness, or other significant life events.

3. Administrative Waivers: Sometimes, the IRS provides administrative relief for specific groups of taxpayers or under certain conditions.

A tax professional like Marcelino Dodge, EA, CTRC, can review your tax records and review your eligibility for a specific type of penalty abatement.  After this review, the gathering of documents is required to help with the preparation of the necessary forms for submission to the IRS.  Your request is then submitted to the IRS.  

You will need to follow-up on the request after a reasonable period of time.  Patience is important as the IRS can take a while to process the request.

Cash Tracks Financial of Colorado Springs

Marcelino Dodge, EA, CTRC

525 N Cascade Ave., Suite 200

Colorado Springs, CO 80903

(719) 359-8789

www.cashtracksfinancial.com

success@cashtracksfinancial.com

 

Colorado Springs: What Can I Do If I Disagree With the Amount the IRS Says I Owe?

 

You receive an IRS notice saying you owe a large sum.  But, you disagree with the assessment, because there is a legitimate question about the correctness of the assessed tax amount.  What you can do is file a "Doubt as to Liability" Offer in Compromise.

Is this the correction option for your case?  Possibly it is, possibly it is not.  You need to consult with a tax professional, such as an Enrolled Agent (EA) because there are pros and cons to this type of offer. 

Some of the pros are:

• Collections stops
• Forces audit reconsideration
• Can reopen Trust Fund Recovery Penalty Assessment
  

Some of the cons are:

• Must offer something (even if it is a $1)
• Compromises future liability (no refunds)
• Taxpayer must be compliant

Remember, this option is designed for taxpayers who genuinely dispute the accuracy or existence of their tax debt. This could be due to errors in the IRS's calculations, misinterpretation of tax laws, or missing information that could alter the liability. Importantly, this type of offer cannot be rejected simply because the IRS cannot locate your return or verify the liability.

To qualify, you must present a compelling case that reflects what the IRS might reasonably expect to collect if the matter were taken to court. This involves providing substantial evidence and documentation to support your claim. The IRS uses its discretion to determine whether your offer is reasonable, considering the potential outcomes of a court case.

If you believe there is a genuine error in your tax assessment, submitting an OIC based on Doubt as to Liability could be a viable path to resolving your tax issues.
For more detailed information consult with an EA, who specializes in tax resolution to ensure your offer is well-prepared and stands the best chance of acceptance.

Cash Tracks Financial of Colorado Springs

Marcelino Dodge, EA, CTRC

525 N Cascade Ave., Suite 200

Colorado Springs, CO 80903

(719) 359-8789

www.cashtracksfinancial.com

success@cashtracksfinancial.com

Colorado Springs: Why Is My Return Being Examined by the IRS?

You filed your tax return and think that everything is okay.  Then, a few months later your get the dreaded letter with an IRS return address on it.  When you open the letter you learn that your return is being examined for any of the following reasons:

1. Failure to report all your income
2. You need to verify your dependents for Child Tax Credit
3. Documentation is needed to claim the Earned Income Tax Credit
4. Any other discrepancy the IRS finds resulting from information provided by third parties

These IRS examinations of income tax returns  are to ensure compliance with tax laws and to maintain the integrity of the tax system.  How can you avoid one of these examinations?

First, be sure to report all your income. It vital to keep good records of every place you work during the year.  If you move, immediately inform employers of any address change to ensure timely receipt of your W-2's.  As a self-employed person report all income received for product and services, including cash payments.  Your clients or customers could send in a 1099 for the payments they made to you.  The IRS used matching software to verify if what is on the tax return matches the amounts reported by third parties.

Second, if more than one taxpayer tries to claim a qualifying child for the Earned Income Tax Credit (EITC), the IRS will often examine a return an request documents supporting the claim for the credit.  If the IRS determines that a payment for EITC as made in error, the taxpayer that received the payment in error will have to pay the EITC credit amount back to the IRS, often with penalties and interest.

Third, high-income earners and those with significant business expenses also attract attention. If your lifestyle or deductions seem disproportionate to your reported income, the IRS may investigate to ensure that all income is accurately reported and that deductions are legitimate.

Last, charitable contributions that appear excessive relative to your income can also prompt an audit. The IRS wants to verify that these deductions are genuine and not inflated to reduce tax liability.

In summary, the IRS examines tax returns to detect discrepancies, ensure accurate reporting, and prevent fraud. By understanding these triggers, taxpayers can file more accurately and reduce the likelihood of an audit.

Cash Tracks Financial of Colorado Springs

Marcelino Dodge, EA, CTRC

525 N Cascade Ave., Suite 200

Colorado Springs, CO 80903

(719) 359-8789

www.cashtracksfinancial.com

success@cashtracksfinancial.com

 

Colorado Springs: What If the IRS Files a Substitute Return For Me?

Forget to file your tax return?  Did you think that if you did not file your tax return the IRS would not notice?  Whatever you are thinking, note that the IRS has more information than you realize.  IRS code section 6020 allows the IRS to file a tax return for you with the information they have that includes 1099's, W-2's, and other tax reporting forms.

The question is what can you do if the IRS has filed a Substitute for Return (SFR) on your behalf?

1. Hire a Tax Professional: An Enrolled Agent (EA) that specializes in tax resolution matters can review your circumstances and assist you in taking the proper steps to resolve this tax matter.

2. Gather Your Documents: Collect all tax returns and relevant financial documents, including W-2s, 1099s, receipts, and any other records that support your income, deductions, and credits for the tax year in question.

3. File Your Original Return or Accept the IRS Prepared Return: Depending on your circumstances, you may not even need to file the original return.  Each case is different, especially if you have several years of unfiled tax returns.

4. Respond to the IRS: Work with your tax professional to timely respond to IRS notices.  I recommend sending any mailings certified with with a return receipt. 

Taking these steps can help fix the situation and potentially reduce your tax liability. Always aim to file your returns on time to avoid the complications of an SFR.

 

Cash Tracks Financial of Colorado Springs

Marcelino Dodge, EA, CTRC

525 N Cascade Ave., Suite 200

Colorado Springs, CO 80903

(719) 359-8789

www.cashtracksfinancial.com

success@cashtracksfinancial.com

 

 

 

Colorado Springs: How Can I Get Audit Reconsideration? What is an Audit Reconsideration?

 

Been audited by the IRS and received a notice with bad news.  Are you stuck with the results?  Or, can you take action to get a result that you feel is more accurate?  Anytime we deal with the IRS the process can be daunting.  But if you disagree with the results of an audit, you have the right to request an audit reconsideration. This process allows taxpayers to present new information or evidence that was not previously considered, potentially leading to a revised audit outcome. 

Here’s a step-by-step guide on how to obtain IRS audit reconsideration:

1. Hire a Tax Professional - An Enrolled Agent (EA) can provide guidance, help you understand eligibility, and ensure your request is thorough and accurate.

2. Gather Documentation: Collect all relevant documents that support your position. This may include receipts, bank statements, or any other evidence that was not available or not considered during the initial audit.

3. Prepare a Written Request: An EA will write a detailed letter on your behalf  to the IRS explaining why you disagree with the audit results. The letter will clearly explain how the included information or evidence impacts the audit findings. 

4. Submit Your Request: Your written request and supporting documentation will be sent via certified mail to the IRS office that conducted the original audit. I recommend keeping copies of everything sent for your records.

5. Follow Up: Patience is important.  It will take several months for the IRS to review your case. It is essential to promptly response to any IRS request for additional information.  

By following these steps, you can effectively request an IRS audit reconsideration and possibly achieve a more favorable outcome.

Cash Tracks Financial of Colorado Springs

Marcelino Dodge, EA, CTRC

525 N Cascade Ave., Suite 200

Colorado Springs, CO 80903

(719) 359-8789

www.cashtracksfinancial.com

success@cashtracksfinancial.com

Colorado Springs: Can I Challenge a Bad IRS Tax Assessment?

 

Nothing causes worry and stress more than receiving a piece of mail with the Internal Revenue Service as the sender.  Then, after you open the piece of mail to your surprise the IRS is assessing you tax and penalties on income that you are not even sure is income you earned.  What do you do?

Step one is to contact a tax professional to help you sort through this and determine if the assessment is even correct.  Marcelino Dodge, EA, CTRC will assist you in determining if the assessment is correct

Next, if it is determined the tax bill is wrong, contacting the IRS to discuss the issue will sometimes resolve misunderstandings or errors. If the initial contact does not resolve the issue, a formal challenge the assessment would be next.

Taxpayers have the right to request a review of the penalty before it is assessed. If the penalty has already been assessed, Marcelino Dodge, EA, CTRC  can help you request a penalty abatement either before or after the penalty is paid.

If the abatement request is denied, you can appeal the decision. An appeal is sent in writing to a different IRS office.  This written request for consideration by IRS Appeals is an impartial reconsideration because your request is being seen in an IRS office that did not initially review your case.

Should the appeal not resolve the issue, the next option is to take your case to Tax Court.  Sometimes though after you file the petition to Tax Court, your case may be settled before even going to court.  If you do go to court and the court finds in your favor and determines that the IRS’s position was largely unjustified, you may be eligible to recover some of your administrative and litigation costs.

Navigating any tax dispute can be complex, so it’s helpful and recommended to consult with a tax professional who can provide guidance tailored to your specific situation. Remember, you have rights and options to ensure fair treatment by the IRS.

Cash Tracks Financial of Colorado Springs

Marcelino Dodge, EA, CTRC

525 N Cascade Ave., Suite 200

Colorado Springs, CO 80903

(719) 359-8789

www.cashtracksfinancial.com

success@cashtracksfinancial.com

Colorado Springs: How Can I Get a Penalty Abated Using Reasonable Cause?

 You failed to file your tax return on time and/or did not pay your taxes. Then, after you file and make a payment on your taxes you receive a statement from the IRS charging you penalties for late filing and penalties fo late payment of your taxes.  After some research you find that you may be able to resolve the penalties through reasonable cause.  What is reasonable cause?  Reasonable cause is a provision that allows taxpayers to request the reduction or removal of IRS penalties if they can demonstrate that their failure to comply with tax obligations was due to circumstances beyond their control. According to the IRS Penalty Handbook, reasonable cause is generally granted when a taxpayer exercises ordinary business care and prudence but is still unable to meet their tax responsibilities. Each case is evaluated individually, based on its unique facts and circumstances.

To help you determine if reasonable cause is possible, Marcelino Dodge, EA, CTRC can review your circumstances.  To qualify for reasonable cause relief, you must provide a written statement under penalty of perjury, detailing the reasons for your noncompliance. Marcelino can help you prepare supporting documentation that can strengthen the request.  Some of the more common basis for reasonable cause relief include reliance on incorrect IRS advice and unavailability of records.

The IRS evaluates whether you the taxpayer made a genuine effort to comply with tax laws and whether the noncompliance was due to unforeseen events. The burden of proof lies with you the taxpayer, who must clearly link the reasons for noncompliance to the penalties imposed. By demonstrating reasonable cause, taxpayers can potentially avoid penalties and reduce their financial burden.

Cash Tracks Financial of Colorado Springs
Marcelino Dodge, EA, CTRC
525 N Cascade Ave., Suite 200
Colorado Springs, CO 80903
(719) 359-8789
www.cashtracksfinancial.com
success@cashtracksfinancial.com

Colorado Springs: An IRS Tax Lien? Can I Still Sell My House?

 

Wanting to sell you your home?  But wait, there is an IRS tax lien on your home. Can you still sell your home?  Selling your home with an IRS tax lien can be challenging, but it is possible. An IRS tax lien is a legal claim against your property due to unpaid taxes, and it attaches to all your assets, including real estate. This lien must be addressed before the sale can proceed smoothly.

When selling a property with an IRS tax lien, the lien does not automatically disappear. The IRS has the right to claim proceeds from the sale to satisfy the debt. However, there are several ways to manage this situation.  Begin with contacting a tax professional like Marcelino Dodge, EA, CTRC to discuss your situation and to learn your options. If your are unable to payoff the IRS in full and get the lien released, then you could request subordination, which allows other creditors, such as your mortgage company to take priority over the IRS.

It's important to communicate with the IRS and seek assistance from a tax professional to have a successful sale of your home.  Proper handling of the tax lien can help you to move forward  with the sale of your home without the burden of unresolved tax issues.

Cash Tracks Financial of Colorado Springs

Marcelino Dodge, EA, CTRC

525 N Cascade Ave., Suite 200

Colorado Springs, CO 80903

(719) 359-8789

www.cashtracksfinancial.com

success@cashtracksfinancial.com

Colorado Springs: What Does it Mean to be Uncollectible? How Can I Qualify?

 

How Can I Be Considered Uncollectible by the IRS?

If you have a large tax debt that can be daunting. But, understanding how to qualify as "uncollectible" by the IRS can provide some relief. The IRS may classify a taxpayer as uncollectible if they demonstrate an inability to pay their tax debt due to financial hardship. Here’s how you can achieve this status:

1. Assess Your Financial Situation: The IRS will evaluate your income, expenses, and assets. Ensure your financial records accurately reflect your inability to pay. Essential expenses like housing, utilities, food, and transportation are considered.

2. Locate a Tax Professional:  Marcelino Dodge, EA, CTRC can help you to file the proper forms using both actual expenses and national standards to see if you do qualify as uncollectible. If you do not qualify, Marcelino will propose alternatives to assist with with your tax issue.

3. Submit Supporting Documentation: Provide proof of income, expenses, and assets. This includes pay stubs, bank statements, and bills. The IRS uses this information to determine if your financial situation warrants uncollectible status.

4. Stay Informed: Being uncollectible is not permanent. The IRS will periodically review your financial status. Keep your records updated and be prepared for future evaluations.

Achieving uncollectible status can provide temporary relief from tax debt collection, allowing you to focus on regaining financial stability.

Cash TracksFinancial of Colorado Springs

Marcelino Dodge, EA, CTRC

525 N Cascade Ave., Suite 200

Colorado Springs, CO 80903

(719) 359-8789

www.cashtracksfinancial.com

success@cashtracksfinancial.com

Colorado Springs: Am I or Am I Not an Innocent Spouse?

 

Are you having to deal with daunting tax liabilities from unexpected issues stemming from a spouse's financial actions? The IRS offers a form of relief known as "Innocent Spouse Relief" to address such situations. This provision is designed to protect individuals from being unfairly held responsible for tax understatements or errors committed by their spouse on a jointly filed tax return.

To qualify for Innocent Spouse Relief, several conditions must be met. First, the understatement of tax must be solely attributable to the other spouse's erroneous items. Second, the innocent spouse must demonstrate that they were unaware of the inaccuracies at the time of signing the return and that it would be inequitable to hold them liable given the circumstances. Factors such as significant benefit from the understatement, desertion, death, or divorce are considered in the evaluation process.

Filing for Innocent Spouse Relief involves submitting Form 8857 to the IRS. It's a crucial step for those seeking to rectify tax issues without bearing the burden of their spouse's financial missteps.

Cash Tracks Financial of Colorado Springs

Marcelino Dodge, EA, CTRC

525 N Cascade Ave., Suite 200

Colorado Springs, CO 80903

(719) 359-8789

www.cashtracksfinancial.com

success@cashtracksfinancial.com