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Danbury Tax Law Blog

Yes, you can offer a compromise to the IRS

Staying on top of paying taxes is not always a simple matter, especially for individuals who do not have their projected income taxes deducted from their paycheck automatically. In some cases, you may receive a bill from the IRS, at which point you should consider your next steps very carefully. If you can pay the owed amount and do not dispute the amount that the IRS claims you owe, it is simplest to pay it in full. However, many people cannot write a single check and pay off a tax bill. Fortunately, there are further options.

If you are unable to pay in full, you can apply for a payment plan with the IRS. However, in many cases, especially if the amount owed is fairly significant, it is wise to consider offering the IRS a compromise payment for a portion of the amount they claim you owe.

Can IRS Notices of Deficiency span multiple years?

When the Internal Revenue Service sends you a Notice of Deficiency, there may be multiple years at issue.

For example, Portfolio Recovery Associates Inc., a debt collection company, recently announced it had reached a settlement agreement with the IRS over Notices of Deficiency from 2005-2012. The IRS claimed that the company owed $192.6 million from those tax years.

What is Connecticut tax fraud and tax evasion?

While few Danbury, Connecticut, residents are enamored of taxes, all need to pay the taxes that are legally due. Failures to do so can constitute tax crimes, such as tax fraud, which carries financial penalties inclusive of the amount owed and often fines as well.

What is tax fraud in Connecticut?

An offer in compromise may spare you from IRS collection tactics

If you can’t pay your past taxes, don’t wait for the IRS to assign a third party to the task of private debt collection. Such third parties may utilize aggressive techniques that border on harassment.

Taxpayer Strategies for Avoiding Private Debt Collection

Could you be personally liable for unpaid withholding taxes?

Seinfeld fans may remember a reference to a character on the show named Al Yeganeh, nickmaned the “Soup Nazi.” The reference actually has a counterpart in real life: A business in Staten Island called Soupman, Inc. licenses the name and recipes of that Seinfeld character.

The show certainly provided free marketing and brand promotion to the business. Unfortunately, a recent tax controversy is providing a different sort of notoriety for the company.

Can the IRS seize your tax refund and apply it to an old debt?

An individual who receives an over payment from a governmental agency generally does not have a legal claim to retain those funds. This general principle also applies to erroneous tax refunds.

The concept of keeping a ledger in the black also applies to tax obligations. If a taxpayer owes taxes for previous years, any refund issued in subsequent years might be applied against that outstanding debt. This liability generally applies only to the taxpayer. However, there is at least one notable exception.

How can an attorney help in your tax dispute?

Tax litigation is a broad term, referring to a dispute with tax authorities at the federal, state, local or even foreign level. The term encompasses both civil and criminal tax matters. It is also the last resort for many taxpayers, utilized only after administrative appeals and settlement options have been exhausted.

In our experience, a client in a dispute with the Internal Revenue Service or Connecticut Department of Revenue Services needs a multi-faceted approach. First, every aspect of the applicable tax law needs to be researched, especially if any areas are unsettled. If there is divided case law or administrative precedent, a taxpayer may be better situated to negotiating an administrative settlement.

Could you be retroactively liable in a tax dispute?

Most legal claims are subject to deadlines, called statutes of limitations. In practical terms, that means that a plaintiff cannot bring a lawsuit after the applicable period of time has expired.

The Internal Revenue Service is also bound by various limitations periods, which vary based on factors such as whether an individual or entity filed a tax return, and/or the degree to which the return contained errors.

How do you appeal a state tax assessment in Connecticut?

If you disagree with a tax assessment or position taken by the Connecticut Department of Revenue Services, the agency’s website states that a taxpayer may file a written protest. However, the process is often more complicated.

For starters, a distinction must be made between requesting a penalty waiver and filing a written protest. The former applies to situations where the tax assessment may not be in dispute, but the tax was not paid on time. If there was a reasonable explanation why a taxpayer did not timely pay the tax due, a penalty waiver might be granted. However, neglect does not qualify as reasonable cause. In addition, there are certain penalties that are not eligible for a waiver, including those assessed in connection with an audit.

Can you appeal an exchange notice to the IRS?

A company may understand the rationale for keeping good records regarding its payroll taxes. Under federal law, any withholdings from employee paychecks should be kept separate, and not spent on other company expenses, before they are submitted to the IRS.

Unfortunately, there is a new employment tax fear on the horizon. According to a recent article, some companies may be at risk for receiving an exchange notice from the health insurance marketplace. This notice would allege that a company affected by the Affordable Care Act has not complied with the reporting requirements.

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