Prescott Tax and Paralegal, your tax resolution specialist in Prescott, explains your options when you are in tax trouble

A letter from the IRS is rarely a good thing. One of the most dreaded letters to get from the IRS is the CP90 – Final Notice Before Levy. It is a final warning shot to scare you into paying and should not be ignored. If you find yourself on the receiving end of an IRS letter, Prescott Tax and Paralegal, your tax resolution expert in Prescott, wants you to be aware of your options.

After an IRS final notice, you could:

• Pay in full – most people would have already done that if they could have afforded it
• Sign on for an installment agreement on your own - with penalties and interest so excessive it feels like it will continue until you die.
• Ignore them - and wait for terrible consequences like garnished wages and tax liens. Don’t do this, ever.
• Contact your tax resolution professional to see what your resolution options are.

The CP90 intends to intimidate you into calling the IRS so the tax man can take as much as possible from you even if it leaves you in dire financial straits, unable to pay your bills or support your family.

A better option is to work with a certified tax resolution expert that can negotiate on your behalf for better results. A tax expert can pursue resolutions that would be difficult - if not impossible - to negotiate on your own. Here are four options to deal with tax debt.

Offer in Compromise (OIC): An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles a taxpayer's tax liabilities for less than the full amount owed. It can be far more reasonable than an IRS installment agreement, but you have to see if you qualify based on your unique financial situation and specific case.

Installment Agreement (IA) or Partial Payment Installment Agreement (PPIA): These are well-structured installment agreements that can slash penalties by 50%. The IA is an agreement to make monthly payments on what’s owed in full while a PPIA lets you make a monthly payment that does not pay the total owed. You must qualify for a PPIA based upon your financial circumstances. These agreements generally run 6 to 72 months.

Penalty Abatement (PA): This agreement strips away penalties tacked onto your tax balance. Penalties include failure-to-file, failure-to-pay, and failure-to-deposit (for business owners). If you’ve never had a penalty before, a first-time abatement (FTA) penalty waiver may apply. Otherwise, your tax relief consultant can fight for a reasonable cause abatement if any of the following apply:

• Illness, death, or incapacitation of the taxpayer or their immediate family
• Fire, casualty, natural disaster, etc. affecting the taxpayer
• Inability to obtain records and documents
• Currently Not Collectible (CNC)

In cases of extreme financial hardship, your tax rep can argue that you can’t afford to pay anything. With this option, your tax debt goes on the back burner, and you make no monthly payments although penalty and interest keep accruing. The big advantage of CNC is that the 10-year statute of limitations on collection keeps ticking so you might be able to ride it out and pay nothing on the tax debt.

If you’ve received an IRS final notice or threatening letter, don’t ignore it. Instead, contact Prescott Tax and Paralegal to speak with a tax resolution specialist in Prescott to get the IRS off your back for good. To schedule an appointment, call us at 928-778-3113. Learn more about the services we offer at http://www.PrescottTax.com.

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Enrolled Agent in Prescott
Prescott Income Tax Preparation
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Prescott Tax and Paralegal, your bookkeeping experts in Prescott, share why small businesses are likely to attract audits

Those dreaded audits! Why do small businesses seem to attract audits by the IRS? Prescott’s accounting experts at Prescott Tax and Paralegal, understand why small businesses are likely to attract audits and what you can do to help prevent them.

Fear not
There should be no unreasonable fear. In reality, an audit is simply a “second look” by the IRS on a business’ tax return. In an audit, the auditor compares the return to the business’ books, ensuring there are no errors or discrepancies. Many audits are completely random. As a compliance check, the IRS selects a certain number of returns every year.

Missteps to avoid
While most audits are completely random, there are some things you can do that increase the chances the IRS will pull your return aside for a closer look. Here are some missteps you can readily avoid:

• High meals and entertainment expenses. Here is where it can get kind of tricky. Meal expenses are legitimate business deductions, but you need to be able to prove that the expenses are ordinary and necessary. Don’t let fear of an audit stop you from deducting these expenses, but make sure you keep good records. detailing every expense: include the names of the people or group in attendance and the business relevance of the meal, or travel expense. Entertainment expenses are no longer deductible.
• Home office deductions. Home office deductions are legitimate tax deductions, but your home office must be used “exclusively and regularly” for business. Your home office needs to be a designated area in your home for your work, not just a kitchen counter or table in the bedroom. Also, be honest about the square footage when you do your calculations for your tax return.
• Vehicle expenses. Unless your vehicle is owned by your business, don’t claim that 100% of your automobile expenses are for business use. In most cases, you are better off recording and claiming your mileage at the standard mileage rate the IRS publishes each year instead of claiming your actual automobile expenses. It is important to keep detailed mileage records as required by the IRS.
• Not keeping receipts. If you do not have the receipt to prove the expense, the expense will be disallowed by the IRS.

Your accounting experts at Prescott Tax and Paralegal understand why small businesses are likely to attract audits and what you can do to help prevent them. Prescott Tax & Paralegal is here to help. To set up an appointment, give us a call at 928-778-3113. Learn more about all the services we offer at http://www.PrescottTax.com.

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FAQ for Accounting in Prescott
Prescott Tax Services
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