May 4, 2010

On May 15th, the IRS will solve your tax problem...

If you choose to take the IRS up on its offer, they will be open on Saturday, May 15th, 2010, in at least one location in each state.

In its press release on May 3rd, 2010, the IRS stated that 88% of individuals who came to the March 27th "open house" had their issue or notice resolved that same day.

If you miss this "open house", don't worry, the IRS plans two more before the end of June: June 5th and June 26th.

This is very timely assistance by the IRS. The IRS has been concerned that the poor economy would lead more taxpayers to stop filing. As of April 15th, the data seems to support the IRS concerns. When compared to last year, there was a 3% reduction in the amount of returns filed as of April 10th (that is over 3 million taxpayers). Even more timely are the initial "balance due" notices (IRS Notice CP14) that are starting to arrive in taxpayers’ mailboxes. These notices, for those who file on April 15th, will arrive between now and the end of June. More urgent notices will continue if the taxpayer does not pay. Eventually, if the account is not satisfied in full or an agreement made, the IRS will attempt to collect on the unpaid balances.

The IRS is now trying to avoid a repeat of what occurred in 2007 when over 29 million people had a "balance due" on their tax return when they filed. Most of them paid when they filed, but millions did not and had to go into IRS collection. In fact, over 9.2 million new taxpayers entered IRS collections in 2009. More should be expected in 2010 if the IRS does not attempt a pre-emptive strike against those exiting the system.

Will it be easier to solve my problem with the IRS at their "open house"?
Only if you are prepared to solve your unique problem. More than likely, many of the problems addressed in the March 27th open house were centered on tax preparation issues for the returns due on April 15th. The next three open houses will see more “problem” than “preparation” issues.
What can you do to prepare?
If you are going to the IRS about a notice, here is how to prepare:
- bring a copy of your notice
- have your identification ready to prove you are the taxpayer
- bring a copy of your tax return in question, as well as a copy of the previous year's return as it may help if there is an error notice on your return
- bring the information requested on your notice. If you do not understand what you need to bring, call the IRS and ask them
If you owe back taxes, here is how to prepare:
- have a copy of your 2010 return, or your extension (if applicable), to prove you are in filing compliance (you cannot solve a tax debt problem without having all of your returns filed)
- bring a copy of your notice
- educate yourself on options to pay the IRS
- bring your financial information, including all of your income, expenses, assets and liabilities if you are proposing to defer payment to the IRS or paying less than the allowable amounts, per their guidelines
- proof of any hardship you are having, including unemployment or high medical expenses

What can the IRS do in an "open house" that it cannot do over the phone?
Basically two actions:
1. They can look up your account directly on their computers. You can go over your account transcripts with the IRS line by line. An experienced IRS representative can isolate your problem quickly and understand what is necessary to solve it. If you ask, they can also provide some immediate relief. For example, if your account transcript has penalties assessed, you may want to request penalty relief from the IRS representative directly. If you do this by mail, it may take up to four months.
The IRS representative can grant it immediately under certain conditions.
2. They can take immediate action on your account because they can see your documents in person. If you deal with the IRS by phone or mail, your documents could be lost or interpreted by different people. This will delay your request or give you a false impression that everything is completed.

Advice to move forward
If you ever decide to see the IRS to solve your problem, follow these steps:
- Be prepared
- Be educated on what you want and what options are available to you
- Document who you spoke with, when you spoke with them, and their badge number
- Keep a copy of everything that you gave the IRS
- Understand what happens next when you leave the IRS
- Know what you need to do next and when you need to do it
- Be prepared to move quickly after you leave. The IRS now has your information.

You should follow these steps whenever you contact the IRS, not just for an "open house."

If you are prepared to solve your IRS issue yourself, take the leap on May 15th.

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