 | Using an Enrolled Agent |
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Taxpayers have many options regarding how they can solve their tax problems:
- They can represent themselves
- They can delegate a family member to act for them
- They can authorize an Enrolled Agent, CPA or attorney to represent them
Note that unlicensed preparers (i.e., those who are not EAs, CPAs or attorneys) can only represent taxpayers before the Examinations Unit of the IRS and only for returns that they prepared. They can not negotiate payment agreements or release liens or garnishments with the Collections Unit nor can they interact with the Appeals Division or the Taxpayer Advocate's Office as the taxpayer's representative.
If you engage my firm to represent you before the IRS or MDOR, you will complete a Power of Attorney (POA) authorizing me to act on your behalf. It also will allow me to:
- Receive confidential taxpayer information regarding your specific tax situation
- Receive duplicate copies of all IRS notices for the tax years you authorize
- Make inquiries regarding the status of your IRS issues
- Answer IRS inquiries on your behalf
- Appear on your behalf for IRS audits and appeals
- Negotiate payment agreements
- Request penalty abatements
Once a POA has been filed with IRS, you generally do not have to interact with the IRS via telephone or in person unless you receive an administrative summons. You will however be working closely with me so I can represent your interests and protect your rights as a taxpayer.
An initial meeting at my office is required to review the correspondence you have received and develop an action plan. We will also discuss my fees for representing you, the required retainer and how you can expect your case to progress.
Example of Federal POA
Click above for an example of a how to complete a Power of Attorney form that you can print and fax to my office.
Blank Federal POA (Adobe Fill-In)Fill-in your POA with your personal information to fax to Dave. Note that you (and your spouse, if married) must sign and date on the second page (line 9 -- do not sign in Part II).
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For many, the initials "I.R.S." are the most dreaded letters in the alphabet. Before the dreaded letter is even opened, visions of money being siphoned out of bank accounts and Federal agents hauling away the family car or selling your house overtake their thoughts. Although a tax collector does have the right to do these things (but not without giving proper notice and an appropriate time for the taxpayer to respond), they are not common scenarios for most taxpayers receiving a letter from the most dreaded agency of the federal government.
TIMING IS EVERYTHING!
Most IRS problems start with an inquiry. These include:
- Requests for unfiled tax returns
- Reminder regarding unpaid taxes
- Proposed changes to your return due to unreported income
- Notice of examination (audit) of specific items of income or deductions
Every letter will have a date that a response is required. Failure to respond by that date will have immediate consequences so you must act promptly. If you need professional help you should immediately contact me the moment the letter arrives. If possible, fax the letter to my office at (508) 580-8418. Remember that these matters take time so it is unwise to call me on (for example) April 29th with an inquiry that needs a response by May 2nd.
NEVER DISREGARD IRS CORRESPONDENCE!
If you fail to respond to an IRS request for information by the deadline stated in their letter your issue will be escalated to the next level. If it is regarding unpaid taxes you could eventually find bank accounts levied, wages garnished, tax lens filed or other types of "enforced collections". These can leave you financially devastated while negotiations with IRS personnel are underway. For example, a single person with no dependents will find their paycheck reduced to less than $175 per week if the IRS initiates a wage garnishment. That person now has less than $800 per month to pay for their housing, food, gas, insurance, clothing, etc.
If the notice is regarding an audit or a proposed change to your return for unreported/underreported income this will become a tax assessment. Ignore the assessment and those enforced collection activities mentioned earlier will begin.
I'M HERE TO HELP!
As an Enrolled Agent I am authorized to represent my clients before all administrative levels of the Internal Revenue Service and the Massachusetts Department of Revenue (MDOR) including:
- Examinations
- Collections
- Appeals
- Taxpayer Advocate Service
As an Enrolled Agent, I serve as your representative in dealing with IRS personnel. In most cases, you will not have to come to an IRS office or speak with an IRS employee.
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| Can't Pay Your Income Taxes? |
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| You Have Options! |
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INSTALLMENT AGREEMENT
Working with the IRS, I can negotiate a monthly payment agreement for my clients. Clients have the option to have the payments withdrawn on the same day of the month from their bank account or they can mail a check to the IRS.
VOLUNTARY PAYROLL DEDUCTION AGREEMENT
I recommend this option for clients who aren't great at tracking their checkbook balances or paying their bills on time. Using this method your employer withholds the payment from your paycheck and forwards it to the IRS on your behalf.
OFFER IN COMPROMISE
An OIC is a proposal made to the IRS to settle your tax debt for less than the full amount. OICs require detailed information regarding the taxpayer income, expenses, assets and liabilities. Usually, you must demonstrate that your financial circumstances will not permit full payment of the tax within the statutory collection period. Do not believe those commercials you see on TV claiming "Your tax debt can be settled for pennies on the dollar!". OICs have a very high rate of rejection at the IRS.
OTHER OPTIONS
- Make full payment by charging your balance due to your credit card (visit http://www.officialpayments.com/)
- Borrow from your 401(k) plan
- Borrow from your friends or family members
- Refinance your home or tap your home equity
- Allow the IRS to levy your IRA or 401(k) plan for the balance due (this would be a taxable distribution but would be exempt from the 10% premature withdrawal penalty)
- Have Dave request a short-term extension of time to make full payment
- Bankruptcy -- seek out an attorney experienced with discharging income tax debt
- Do nothing -- make them find out where you work and what you own and let them take what they want (not recommended!)
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| IRS Wants to Close the "Tax Gap" |
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| More Audits Are Planned! |
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The days of the "kindler, gentler IRS" are now a memory. The IRS estimates that over $300 billion dollars are lost due to what is known as the "tax gap" (the difference between what the IRS should have collected vs. what the IRS actually collected). With the federal deficit growing each year, IRS is feeling the pressure from Congress to find every missing tax dollar they can. Where are they looking? Here's a short list...
The Self-Employed and Small Businesses: Because these taxpayers do not receive W-2 or 1099 forms, there is a high degree of noncompliance including failure to file tax returns, understatement of self-employment income and overstatement of business deductions. The IRS estimates a whopping 43% of the tax gap is due to taxes related to self-employed individuals. My small business clients have always been advised to keep good books and save receipts. This advise is going to be more important now than ever!
The Underground Economies: This includes the eBay sellers, contractors, housekeepers, illegal immigrant labor, flea market vendors and child care providers who knowingly and willingly either fail to file tax returns or fail to report all of their income on the returns they do file.
Unusual Deductions: The IRS computers will be kicking out more returns for audits when deductions seem unusually large in respect to the income reported on the tax returns. Since documentation is not required for most deductions when a return is filed, the IRS may ask for proof of medical expenses, charitable contributions, employee business expenses, etc. to ensure that taxpayers are not creating fictitious write-offs.
Business Losses: Taxpayers whose businesses generate tax losses year-after-year may have to prove that they were in fact running a business and not engaged in a hobby (hobbies do not generate tax losses but the income from the hobby is taxable). Contact Dave if you are concerned about continuous business/hobby losses.
Earned Income Credit: This is a tax credit that can provide up to $4800 per year to lower income clients. The IRS and MDOR are frequently auditing these returns to ensure that their income is not underreported and that the children claimed on the return reside with the taxpayer for the required amount of time and are related to the taxpayer. MDOR has been more aggressive with their auditing, as they actually withhold refunds upon receipt of a filed tax return and request that the taxpayer provide proof of income, birth certificates, social security cards for dependents, etc.
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