No one likes filing taxes, and many will put it off until the last minute. They find themselves rushing around trying to find all the information they need to file accurately. During the rush, you make mistakes, and you get that dreaded letter from the IRS letting you know you now have penalties you need to pay.
So, you got a letter from the IRS, how can a CPA help resolve your issue, and why do you need to hire one?
A CPA can do a few different things for you they represent you during a tax audit, assist you with back taxes, and prepare an offer and compromise where you may not have to pay the total amount owed. The fact is when you’re in trouble with the IRS, you don’t want to be alone. Therefore, hiring a CPA is essential.
The U.S. tax code has hundreds if not thousands of rules, and it is doubtful that you know them all. People make many different mistakes on their taxes, and below you’ll find three of the most common. If you find yourself making any of these mistakes, reach out to a tax resolution specialist who is qualified to help you.
I Owe Back Taxes What Can I Do?
The first thing you need to know is don’t ignore the IRS. They will keep calling and mailing you until you respond. Even worse, they may come after your assets. When you get the first letter, take a few breaths, and call them. Here are a few options for people who can’t pay the total amount owed.
- Set up an installment agreement
Installment agreements are payment plans. They will base their decision on how much you owe and how quickly you can pay off your debt. If this is the option you choose, you will have to pay an application fee based on your income. If you are low-income, you’ll have to fill out Form 13844. The online payment agreement will then need to be filled out and then submitted online. There will have to pay interest on the unpaid balance, and they may void the agreement if you miss a payment or don’t pay on time. If you are unsure if this is your best option, contact a tax resolution specialist in your area.
- Request a Short-Term Extension
Only do this if you can pay off your debt within 120 days. Unlike an installment agreement, there are no fees to request the extension, although there is a penalty of 0.5% each month of the unpaid balance. You can fill out an online form, call them, or hire a CPA to assist you in applying for this.
- File an Offer and Compromise
This is when you offer to pay a percentage of the amount you owe them, and the rest of your debt is forgiven. For this type of agreement to work, you must prove that you’re unable to pay the bill. There are a lot of complicated forms you must fill out and information you have to gather. You’ll also have to have a good case of why they should accept your offer. If you do qualify, you’ll have to make sure to file your taxes promptly. The offer and compromise can be tricky, so you probably want to consider hiring a professional to do it for you.
I Haven’t Filed Taxes in Five Years – What Do I Do?
The first thing you need to do is gather all your information for the last five years, if possible. If you don’t have the records, you can request your wage and income report from the IRS website. These only go back for so many years. If you need one beyond the ones available electronically, you’ll have to call the IRS and request them.
You’ll also need to gather your state income information so you can file with them. They do not keep their information online as the federal government does. You’ll need to call them and ask for any W2 information or 1099.
You can’t use current tax forms to file past returns because of all the changes in tax laws, so you’ll have to find documents for the correct years. Because the tax laws change so often, I recommend getting a CPA to help you with your taxes. Since you haven’t filed in years, you may already owe a large sum, and you don’t want to get any other penalties due to mistakes you make.
If you owe taxes for the years, you didn’t file. You will have to pay interest and penalties as well as the amount due. It’s also important to note that the IRS doesn’t pay old refunds. The good news is that although they don’t pay refunds, they will credit any refunds you have to taxes you owe. There are a few different ways a certified tax specialist can help you with your past taxes; you’ll find them below.
- Gather wage information and prepare the tax returns
- Request a penalty abatement if you’re eligible
- Set up a payment agreement with the IRS
I Didn’t Claim All of My Income. What Do I Do?
This depends on a few different things. The IRS may have caught the mistake and will send you a CP-2000. If this is the case and you agree with their findings, call them and let them know. If you do this, you don’t have to file an amended tax return; just pay any taxes due.
If you realize the mistake immediately, you need to file an amended tax return and include the W-2 in with it. The process is straightforward. But if you are worried about doing it incorrectly, you can hire a CPA to do it for you.
If nobody finds your error, your taxes may be filed and accepted. This one could end up being relatively expensive. During one of their routine audits, the IRS may find the mistake and then charge you interest plus penalties.
An Experienced CPA Can Help
Each of these common mistakes comes with complications that can wreak havoc on your life. If you find yourself in one of the situations listed above, make sure you contact the IRS immediately to work out a solution. If you don’t feel confident in your ability to solve the issue on your own, contact an experienced professional CPA to handle it for you.
Tax Avenger located in Canton Michigan is a full-service tax and accounting firm that specializes in tax problem resolution. We have more than 20 years of experience that ensures competency to resolve your tax issues, as well as clear your name and put together a tax plan so that you don’t have any future tax problems.
We are dedicated and committed to providing exceptional service to our clients. Whether you need tax preparation, business accounting services, bookkeeping services, or help starting your business, we’ve got you covered. Call today and schedule a Free Consultation with a tax specialist!