The IRS is Not Your Friend. Caution Needed.

The IRS is not your Friend. Caution Needed. An SFS Tax Problem Solutions Blog. 

Recently a man called my office who hadn’t filed taxes in over a decade. He said he wanted to go to his local IRS office and get transcripts of his 1099s and then go to a tax preparer. My staff advised him against it, but he insisted.

This is not a good idea.

It’s like going to the judge to admit you’ve done a crime, and then seeking an attorney to represent you. You should seek advice first; then act.

Unfortunately, the man wouldn’t agree to a free consultation with me first. I could have saved him a lot of aggravation.

So for all of you out there who think this sounds reasonable, please listen up:

The IRS is Not Your Friend

The IRS has a job to do – collect revenue.

This doesn’t mean that they won’t treat you with courtesy.

It’s just that their main goal is different than yours.

Hey, it’s great that after more than a decade this man decided to come clean. The only problem is that he could be costing himself thousands of dollars. You need to approach these situations in the right way.

That doesn’t mean that you treat them with disdain. The end goal is to get right with the IRS, which is an attitude that will serve you well as you go through the process.

It’s like playing a game of chess. You have to know the rules and how to play it, or you’ll be off the board in no time.

There are no cut-and-dried answers here. Someone with experience and knowledge needs to assess your situation and provide advice.

Here are some little-known facts about the IRS and their collection activities.

The IRS only has 10 Years to Collect… from When the Return is Filed

So all the years prior to that? He doesn’t need to worry about them. There are some exceptions to this rule, however, as there are to almost every tax rule.

If you did not file a return (as the man who called my office did not), the IRS can create one for you based on the information they have. If you owe tax, they can make a deficiency assessment.

Guess what? The ten-year period starts at the time the return is filed – not ten years ago when you actually earned the money or when the return was originally due.

So maybe it’s not a good idea to alert them to the fact that you didn’t file and may owe money?

The IRS can make a Mistake

Believe it or not, the IRS is staffed with humans just like you and me. They can make mistakes.

That’s why you need experienced tax representation.

Enrolled Agents have either worked for the IRS, or they’ve gone through rigorous testing and continuing education to become one. An Enrolled Agent will scour your records to make sure that you actually owe what the IRS says you owe.

I’ve seen errors in expense calculations for small businesses, for example. Leave out an expense that is large enough and your tax debt goes up significantly. If you forget to include an IRA contribution, your tax bill can increase.

As another example, many people think that all 1099s should be reported as income. This is not always the case. Distributions from college savings plan covering qualifying education costs should not be counted as income. Even if you didn’t use the money for school, the taxes due are only on the earnings. The after-tax dollars you used to fund the account in the first place do not count.

You May Not Owe Anything

You won’t get in trouble for not filing your taxes. You will get in trouble for not paying them.

If you don’t owe anything, all will be fine. You may even get a refund.

Once again, I would recommend going to a knowledgeable Enrolled Agent. An EA’s main goal is to reduce your tax burden or maximize your refund.

The IRS has no interest in paying out refunds to non-filers. They stay focused on getting revenue in the door.

Of course, you only have three years to claim a refund, so that provides another incentive to act fast.

In every case, you have nothing to lose by seeking an Enrolled Agent’s advice. At SFS Tax Problem Solutions, we happen to offer free consultations. Take advantage of that before going to the IRS.
Jeffrey Schneider, EA, CTRS, NTPI Fellow, has the knowledge and expertise to help you reach a favorable outcome with the IRS. He is the head honcho at SFS Tax & Accounting Services as well as the Enrolled Agent and Certified Tax Resolution Specialist for SFS Tax Problem Solutions.
Now What? I Got A Tax Notice From The IRS. Help! Defining and deconstructing the scary and confusing letters that land in your mailbox. Jeff defines and deconstructs the scary and confusing letters in a fashion that mixes attention to detail with humor and an intricate clarification of what is what in the world of the IRS.

The book is available in paperback and ebook on
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