Reduce Back Taxes and IRS Penalties: 7 Little Secrets the IRS Hopes You Never Learn

As much as you may fear the wrath of the IRS to levy back taxes and IRS penalties, the tax man is afraid of exposure too. In the audit battle, the IRS fears two things: 1) You hiring a tax attorney or Certified Tax Resolution Specialist, and 2) You learning these seven little secrets about reducing back taxes and IRS penalties. With years of record deficits (and even more in the proposed budget), the government is more eager than ever to get every dollar of back taxes and IRS penalties from delinquent taxpayers. If you find yourself owing back taxes and IRS penalties, here are the seven little secrets the IRS hopes you never see.

#1: Knowing your taxpayer rights gives you leverage.

The most significant way to reduce back taxes and IRS penalties in the audit process is to know your rights as a taxpayer. Instead of feeling powerless in the face of potentially crushing back taxes and IRS penalties, a good tax attorney or a Certified Tax Resolution Specialist will allay your fears by informing you of all the rights and options that are available to you.

#2: Filing unfiled tax returns is an opportunity for a fresh start.

You can get a fresh start on your back taxes and IRS penalties, even if you haven't filed your returns in seven years. Think of it as a back taxes and IRS penalty reboot. Any tax attorney or Certified Tax Resolution Specialist will tell you that you won't get off scot free (trivia point: "scot free" is a 13th century Scandinavian term for tax free), but you can improve your back taxes and IRS penalty situation. Yes, in addition to the regular back taxes debt and standard IRS penalties, you might have to pay as much as 25% in non-filing and non-payment IRS penalties, but in going back years to file unfiled tax returns, you have the benefit of 20/20 hindsight. You can amortize losses. A tax attorney or Certified Tax Resolution Specialist, by submitting several years at once, may get you a better deal on an individual year by reducing your back taxes and IRS penalties collectively.

#3: Take your pick of 148 IRS penalties. Just like Eskimos have 40 words for snow, Internal Revenue has over 148 different IRS penalties they CAN hit you with. Even the best tax attorney or Certified Tax Resolution Specialist might not be able to prove your back taxes innocence, but your tax attorney or Certified Tax Resolution Specialist might be able to persuade the IRS to levy a lesser back taxes debt and IRS penalty. The IRS auditor on the other side of the desk has a lot of latitude to decide what IRS penalty to inflict. This is where a seasoned tax attorney or Certified Tax Resolution Specialist earns their fee. A tax attorney or Certified Tax Resolution Specialist is fully fluent in every tiny nuance of the IRS tax code language. Watching your tax attorney or Certified Tax Resolution Specialist haggling with an agent over back taxes and IRS penalties, is like watching an opera in a language you don't understand. One virtuoso performance later, what you feared would be a dark and stormy bloodbath finishes with a happy ending.

#4: You can reduce IRS penalties to zero for reasonable cause.

If you've got a superstar tax attorney or Certified Tax Resolution Specialist, they can help you reduce the IRS penalties to zero. You have to show reasonable cause, but this is what tax attorneys or Certified Tax Resolution Specialists do. You may think you've got a reasonable cause to reduce IRS penalties, but in most cases your back taxes excuse has been tried a million times before without success. Only someone who knows the IRS tax code inside and out (like a tax attorney or Certified Tax Resolution Specialist) will know what "reasonable causes" work with the IRS.

#5: You can end IRS audits.

There have been whole books written about avoiding back taxes and IRS penalties. Every year those books get updated. Any good tax attorney or Certified Tax Resolution Specialist will tell you that the best way to avoid an audit is to file and pay on time. If you can't pay in full, at least make a token payment of $5 to avoid nonpayment IRS penalties. If you get an audit letter, a tax attorney or Certified Tax Resolution Specialist knows the steps to take to end the audit quickly. You wouldn't believe how long some IRS auditors take to perform an audit. Just to give you an indication, once your audit reaches the 28th month stage, the IRS will ask you to file Form 872, granting the IRS an extension to continue auditing. Every tax attorney or Certified Tax Resolution Specialist in the country will tell you not to sign without trying to negotiate a back taxes and IRS penalty deal. Once an audit reaches the THREE-YEAR mark, Uncle Sam can't levy IRS penalties. (This almost never happens.) So unless you want to possibly lose almost three years of your life to the IRS, let your tax attorney or Certified Tax Resolution Specialist find a way to end the audit as soon as possible.

#6: Legal representation for audits vastly improves your chances for succesful tax resolution.

If you get audited, talking to the auditor yourself is the worst thing you can do. Everything you say is an admission of guilt (at least in the eyes of the IRS). Every tax attorney or Certified Tax Resolution Specialist can tell you real life horror stories where a taxpayer made what they thought was an innocent or helpful comment that landed them with HUGE back taxes debt and IRS penalties. As the proverb states, "he who is his own lawyer has a fool for a client." Treat an IRS audit as seriously as you would a murder trial. You are looking at jail time here. Get tax help from a tax attorney or Certified Tax Resolution Specialist as fast as you can.

#7: The IRS does make deals.

The tax man does make deals on back taxes owed, including interest and IRS penalties. Because this is probably your first time before the IRS, you don't know the kind of deals you can get. A tax attorney or Certified Tax Resolution Specialist makes deals with them all day every day including negotiating Offer In Compromise tax settlements and IRS payment plan. A tax attorney or Certified Tax Resolution Specialist has a professional relationship with IRS auditors. They know not only what deals they have personally gotten from the IRS in the past, but a good tax attorney or Certified Tax Resolution Specialist hears about the best deals others have gotten from the IRS, as well. You want a tax attorney or Certified Tax Resolution Specialist, and their deal-making experience, in your corner.

When it comes to an IRS audit or reducing your back taxes, you may feel you've been dealt a bad hand, but knowing these seven little secrets to reducing back taxes and IRS penalties can be your ace in the hole. Getting an experienced tax attorney or Certified Tax Resolution Specialist to play your cards is the best way to walk away from this high-stakes game a winner.

Author:.

Michael Rozbruch, one of the nation's leading tax experts, is a Certified Tax Resolution Specialist (CTRS), licensed CPA in the state of Maryland and CEO & founder of Tax Resolution Services. He teams up with an expert staff of tax attorneys, CPAs, and tax relief professionals to help individuals and small businesses solve their IRS problems with tax liens, unfiled back taxes, offers in compromise, wage levies, tax relief, delinquent re...

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