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Insights
Accounting & Consulting
Understanding your rights and responsibilities
The one common factor that affects
every American is the fact that each
of us must deal with the IRS. Where
most taxpayers pay their taxes and file
returns annually, there is always the
unfortunate few who either get selected
for investigation or can’t resolve an issue.
Smart Business spoke with Samuel L.
Tuck, principal-in-charge of the Tax
Department at Tauber & Balser, P.C.,
about how to deal with the IRS during an
audit and options available to make that
situation less painful.
What events would trigger the IRS to examine a tax return?
An IRS audit or even a taxpayer error
can cause the IRS to be your biggest
creditor. The difference between the IRS
and your average creditor is that the IRS
can seize your wages, bank account or
even your home without a court order or
judgment. Your tax return may be examined for a number of reasons. Your tax
return may be selected for examination
on the basis of computer scoring called
Discriminant Inventory Function System. Your tax return may also be selected
on the basis of information received
from third parties, such as W-2s and
1099s. Furthermore, the IRS may question the treatment of a certain transaction, such as a real estate sale or a deduction of certain expenses.
How are most IRS audits conducted?
The myth of an IRS audit is that an IRS
agent shows up at your office or house
demanding information. Contrary to that
belief, most IRS examinations are completed by written correspondence with
the IRS. An examination usually begins
with the IRS notifying you that your
return has been selected for audit. At this
time, the IRS will request from you all
necessary documents and information to
resolve the matter. Do not hesitate to ask
about anything that is unclear to you. If
you seek the assistance of a professional
to handle your audit, you will need to
provide a power of attorney.
Even though the IRS has the ability to
put your life in a tailspin, things will seem
a lot more manageable if you know how
to exercise your options. The IRS is usually willing to provide more time for payment and even a reduction in overdue
taxes, if you know your options. Ten
years ago, the IRS moved at a very slow
pace. Sometimes, it would take months
or even years for the IRS to address an
issue and even longer to resolve. As technology has become more sophisticated,
overdue taxes are quicker to appear and
are quicker to be acted upon by the IRS.
Most tax liens and levies are now computer-generated.
What are some tips when dealing with the
handling of taxes owed?
■ Understand why you owe taxes.
There are many instances where a taxpayer may focus more on the taxes owed
and not the reason for the tax assess-
ment. If you can’t comprehend why the
taxes are owed, please seek help from a
tax professional.
■ Be willing to cooperate with the IRS.
Provide the IRS all proper information it
may request. Trying to bully the IRS
won’t get you very far.
■ Understand your options. After the
examination, if any changes to your
taxes are proposed, you can either agree
with the changes and pay additional
taxes or you can challenge the findings
made by the IRS. About 25 percent of
taxpayers can make a deal with the IRS.
These deals can range from creating a
payment plan or even an Offer in
Compromise. An Offer in Compromise
allows a taxpayer to settle unpaid taxes
at a relatively large discount. The Offer in
Compromise process is lengthy and
tedious, however, the results can be quite
beneficial.
■ When dealing with unpaid business
payroll taxes, be sure that you understand not only the business’s liability but
also the potential liability that can be
charged to the individuals responsible
for paying the payroll taxes. Also, the
penalties for these unpaid taxes can total
100 percent of the unpaid tax.
■ As a last resort, filing for bankruptcy
can reduce or eliminate some tax debts.
Regardless of what the IRS may tell you,
consult legal counsel to determine if the
bankruptcy option can solve your tax
problems. Be aware that filing for bankruptcy is complicated and can alter your
future financial situation.
In dealing with the IRS, it is your right
and responsibility to comply, question
and act. Make sure you understand the
situation and don’t be afraid to seek help
when needed. <<
Leslie B
Chief O
Samuel L. Tuck
Principal-in-charge
Tax Department
Tauber & Balser, P.C.
FOR
ACC
SAMUEL L. TUCK, CPA, MTX, is the principal-in-charge of the Tax Department at Tauber & Balser, P.C. He has more than 15 years of
experience with a strong concentration in taxation for real estate partnerships and developers and a variety of small to mid-size businesses. He has developed expertise in technology-based companies, S corporations and limited liability companies. Tuck has extensive
experience as well with family limited partnerships, trusts, international taxes and estate planning. He regularly consults with clients to
improve their business operations and economic and accounting issues. Reach him at (404) 814-4901 or [email protected].
Insights Accounting & Consulting is brought to you by Tauber & Balser, P.C.
Smart Business Atlanta | July 2008
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