So What about That Ad That Says You Can Make an Offer on IRS Back Taxes

Let's try to understand how IRS back taxes work.

Let's take this scenario up as an example. Let's say, that in the year 2006, you decided that it would be a good idea if you went and got stock options. Unfortunately, you made a bad bet and in a couple of months, it was obvious that they were worth very little. Or maybe you made an investment in one of those get rich quick schemes on the Internet, and it doesn't pay off (big surprise).

But a few things go well for you, too. You went to Atlantic City and won a few thousand dollars. A year down the line, the financial crisis begins. You are laid off from work, you lose your health insurance and a member of the family needs an operation.

In the middle of all this, a piece of IRS certified mail shows up under your door. It turns out that you forgot to pay anything for the Atlantic city winnings, and now, they want you to pay them $20,000 in back taxes. Of course, you don't have anything, so you feel that you should just send them what you can - a check for $1000 to show them that you mean well.

You do finally find a low-paying job, but by now, the credit card companies are on your trail too. As time goes on, you notice that your IRS back taxes are mounting. They're asking you to pay more and more because at your new place of employment, there's nothing withheld out of your paycheck for your taxes. You figure you needed every penny you had and couldn't afford to have anything withheld.

At this point, there's nothing you can do but to pick up every piece of certified mail that arrives and then, too scared to open it, you put it all in a big Samsonite suitcase in the closet. Before long, the Samsonite suitcases begins to fill up too.

You're worried sick about all this, and you figure that you buy a nice iPad 3 with the one credit card there is a little spending limit left on, to console yourself. One day, as you're surfing the net, you see a great ad in full Retina Display glory - they say that you can settle your IRS back taxes by paying no more than 2% of what you owe.

When someone says that to you on a high resolution screen, what choice do you have but to believe them? Well, they have all kinds of amazing testimonials - people who have paid off $100,000 IRS back taxes for just $500 for instance.

All you need to do, they say, is to offer the IRS something called an offer in compromise. That's just a good faith payment to the IRS if you tell them that you really are not able to pay anymore. The IRS just takes your word for it, and they completely erase your debt. Of course, you feel that you should jump at the offer, right?

As you might expect, that's not how this works out. It's not that there Offer in Compromise system is fake. It's real, certainly, and it's been around for years. But you have to prove to the IRS that you really are poor. They don't take your word for it. They demand proof.

If you're someone who has an iPad (and the IRS knows), they are going to want it first of all. You need to give them a full list of all your assets so that they know that you're poor. Well, that's how the cookie crumbles.

Is There a Way out of an IRS Tax Levy Situation

A CP 90 or CP 297 notice in the mail from the IRS - it's one of the scariest things you ever experience, to open an envelope with one of these notices. An IRS tax levy intimation isn't an unstoppable force that has been set in motion. You still have the power to change its course.

But you have to be quick. You can be one of those people who are too afraid of the IRS to open an e-mail from them. Once you get an IRS tax levy notice, your 30 day clock to respond starts. When your time runs out, they begin delivery process - they come and grab your property or something to pay for what they think you owe them.

No, they aren't going to beat your door down with a battering ram and grab your large screen TV. They'll just send an IRS tax levy notice to your employer and grab your money right at the source.

This is a situation that you don't want, of course. Once your place of employment knows about your tax problems, it isn't going to look good on your employee evaluation. Basically, the IRS, once they set their sights on you, are not going to let go until you either pay up or give them a reason why they have the wrong man.

Now that last part probably has your interest right away - convincing them that they have to wrong man. The first thing you want to do is to get professional help - go to a tax firm and retain them. You need their guidance.

Take a look at all your tax returns and try to look for and find out what the IRS has a problem with. If you owe the IRS anything, of course, it's going to be hard to get them off your case.

After you've taken care of all your back taxes, see your tax professional about putting a 433-F financial statement for the current year together - fully supported with old documentation needed. Once the IRS takes a look at your 433-F, they'll come back to you with their thoughts on how you can put this behind you.

It couldn't hurt if you got yourself abreast of the IRS to find out what expenses the IRS allows in your kind of case. If none of this seems to work for you, you do have other options at your disposal.

You could, for instance, talk to the IRS to agree to an installment plan. They'll ask you to prove to them that you really are unable to pay all their dues right away. But if you do convince them, this could be a perfectly acceptable way to go forward. Or else, if you are able to prove to them that you're too financially challenged to be able to pay them back, you can come back to them with an Offer in Compromise.

You really don't have to worry about having the IRS believe. Most of the time, they are just happy to work with you.

Help your Business Emerge from an IRS Tax Audit Owing Nothing (as Opposed to Owning Nothing)

No business wants to tangle with a snorting and charging IRS (come to that, no individual person hopes for that either). Small businesses can be especially vulnerable to an IRS tax audit - in particular, ones like small stores and restaurants that do a lot of cash business. Mistakes happen when you handle cash. Any time a business finds itself marked by the IRS they know that it doesn't matter if they are found innocent of any tax law abuse in the end - it's going to cost them a lot of money and a lot of time. Not to mention everyone's going to go home with an ulcer in the end.

There are things you can do though, that can help you go through the ordeal with the minimum fuss possible and help you emerge at the other end owing nothing (as opposed to owning nothing).

When you receive notice that you are under IRS tax audit, that isn't to send you into a panic. Most audits aren't the body cavity-search experience that you hear they can be. Usually, all they want is a little reassurance that some math error somewhere is only a clerical mistake. Sometimes, they'll find that the numbers on your 1099 doesn't agree with the figures on the company return. If you could just do a new tax form or give them the right document, they'll just go away (they have other people to torture, you know). Sometimes, there are certain deductions that entities like real estate investment businesses can claim that wouldn't apply to other businesses. The auditor will just want to know that all is on the up and up.

Not even accountants and CPAs deal with the IRS on their own when they have the bad luck to get audited. It's stressful for them too. CPAs hire CPAs or tax attorneys when they are audited. It takes emotion out of the experience. A self-composed professional can zero in on problems in an IRS auditor's assertions. The tax law isn't black and white in all places. A lot of the time, laws can be open to interpretation. And an auditor, can choose to take a hardline for no reason. It takes a knowledgeable tax authority to be able to argue with such an auditor.

Remember how in the movies the police always say that anything you say can and will be used against you in court of law? That applies to audits to. In your to appear cooperative, you might volunteer information that they could use against you. Remember that you're not to the trust the IRS (not that you would need to be told that, but people tend to forget when they feel threatened). You want to give the IRS exactly as much as they ask and no more. If possible, answer everything with a yes or no.

In the end, you don't want to assume that whatever the IRS tax audit contends is right. They are as liable to make mistakes as anybody.

You always Knew that IRS Income Tax Calculations had to be a Rip-Off

All you hear about these days when you open the papers or turn on the news is how the country has a terrible federal budget deficit and how something has to be done to bring it under control. One of the solutions that is suggested from time to time is that the government should think of initiating IRS reform for a better way in which to collect revenues and to do away with inefficiencies. IRS income tax reform should occur for other reasons as well though. As disgruntled taxpayers have noted for ages, there is so much about the laws that the IRS runs on that can be unfair to the taxpayer. Should reform ever come about, these are what the IRS should correct before anything else.

Renting a home to live in as opposed to buying, has become far more popular today ever since the housing crisis started. If you own a home, you can claim a tax deduction for your property taxes and for your mortgage interest. If you sell your home, you don't pay any income tax for up to a half-million dollars. If you make any green improvements to your home, you get tax credits. Now renters get no IRS income tax breaks whatsoever. Which, if you think about it, is unfair. Either renters should get the kinds of tax breaks that homeowners do, or homeowners should lose their tax breaks as well.

Let's say that you have a job where you don't get health insurance coverage. You have no choice but to get coverage by buying it on the open market. With your after-tax salary. There are no tax write offs that you can claim then. To employees who have health coverage at work though it's tax-free. Even people who run their own business have permission to write off whatever they pay in premiums. It's just the poor people who work jobs that don't offer coverage who get nothing. This kind of IRS income tax discrimination has to stop.

Most people hate being taxed once; how about paying the IRS income tax three times for the same income? That's what happens when your Social Security benefits are taxed. You'll notice this when you first start receiving your benefits. About 85% of your check is taxable. The problem with that being taxable, is this. Social Security benefits aren't free; they are technically supposed to be income you were supposed to be paid when you worked, that the government just held back for you so that you would have something to live on after retirement. So technically, that's income you've already earned. If the government has been holding onto your money for this long, they earn something on it. And anyway, Social Security is something that is considered a part of your taxable salary when you work. You've already paid taxes on them; and you've forgone interest; now when you actually get your check, you're paying taxes.

Look at it this way - the government is already completely short of money. What would they do if they didn't get you three times for the same thing?