There is no escape from paying federal income taxes. But as a taxpayer, you are entitled to contest any IRS tax bill that you consider to be unjustified. But there is a way to do it, a procedure to be followed.
Here are some of the things to be kept in mind when fighting back a tax bill.
Consider this scenario: It’s been two months since you filed your tax return. You receive a notice from the IRS stating that they have specific information that you did not report an extra $10,000 you made in the last financial year.
The tax attorney would tell you if the tax can be reduced or removed. If the tax can be reduced, then the interest will be reduced too, depending on the tax issue.
The IRS offers two choices in this case: Sign the form sent by them and mail it back if you agree. Or send a detailed explanation as to why the information with the IRS is incorrect. You can contest the tax bill, provided you do so quickly.
The first thing to do is to answer the notice. Examine the tax bill closely for any discrepancies. Consult your tax attorney on this.
If you fail to respond to the first notice, you’ll be sent an Examination Report along with a letter from the IRS. You will at this point be given a deadline of 30 days to respond to the tax bill.
Identify the discrepancies in the IRS tax bill and prepare a detailed protest. Sign and mail the same to the nearest IRS office and keep a copy with you. Make sure to hold on to a proof of the mailing.
Your letter should have specific details with supporting documents. Stick to facts and not rhetoric.
The IRS reviews the protest and if they consider that to be legit, they transfer your case to the IRS Appeals Division. IRS Appeals is a separate part of the IRS – it is their job to resolve tax disputes.
You should at this point appoint a tax attorney or tax resolution expert to negotiate directly with IRS Appeals. The tax attorney tries to work out a compromise with the IRS at the nearest Appeals Office.
Generally, most tax cases are resolved at this stage. If you fail to resolve the tax dispute at the Appeals level, then you will be sent a Notice of Deficiency by certified mail and given 90 days to respond.
There is only one way to respond to a Notice of Deficiency, which is to file a Tax Court petition at the U.S. Tax Court office in Washington D.C. Everything related to this process is handled by your tax attorney. You must adhere to the 90-day deadline; otherwise your case will not be heard.
The Tax Court trial is held at a federal courthouse close to where you are. The procedures are generally quite simple and there is no jury at the trial. You are allowed to call witnesses to prove your case.
You can at this stage request permission to transfer your case back to IRS Appeals. Or, you can ask for an extension to the 90-day deadline in writing.
As long as you respond to the notice within the stated timeframe, the IRS may consider reversing its action, after taking all facts into consideration. But this is never easy and you require the help of an experienced tax resolution expert.
Another option is to pay up the amount stated in the tax bill and then file a claim for a refund later. If the refund is denied, you can then hire a tax attorney to sue the IRS for a refund.
Defense Tax Group is a leading tax resolution firm based in Los Angeles CA. We really care about our clients and help them in their time of need. We are very good at what we do and have saved our clients more than $200 million so far.