Under no circumstances should taxpayers represent themselves at an audit. Generally, the IRS uses a complex computer program to select returns that are “ripe” for audit. Certain returns on their face receive much more scrutiny than others.
The OIC process is a great way to settle your tax debt. However, this process is difficult and can be very costly if not done correctly. Under somewhat strict circumstances, the IRS will compromise your tax debt for a lesser sum.
Once the IRS makes a tax assessment against a taxpayer and the tax goes unpaid after first notice, a tax lien arises on all the taxpayer’s property. To secure themselves against other potential creditors of a taxpayer’s property, the IRS files a Notice of Federal Tax Lien (NFTL), usually at the County Clerk’s office in the county where the taxpayer resides.
If the IRS has issued notices of levy against you, then you have not had good representation. Generally, the IRS issues levies to seize property of a taxpayer held by a third party. For example, bank accounts and salaries. There is a whole host of appeal rights that help protect taxpayers from levy action, but many times these rights go unused.
The IRS has a stand-alone administrative Appeals Office, while New York State tax appeals are handled by the Bureau of Conciliation and Mediation Services or through the independent Division of Tax Appeals. Generally, there are a host of appeal rights available to taxpayers to dispute audit results or collection actions.
Under certain circumstances, the United States Tax Court has jurisdiction to review IRS audit results and collection actions, while the Tax Appeals Tribunal reviews cases related to New York State. However, like other “tax rights” the court’s ability to review your case will expire with time.
Generally, when a married couple file a joint income tax return, both spouses will be jointly and severally liable for all the tax due. This is true even if the tax debt is the result of an audit, or if only one spouse earned taxable income. However, under certain circumstances, one spouse may qualify as an innocent spouse.
Under various tax laws found in both the federal and state tax codes, an individual may be held personally liable for corporate business taxes that went unpaid. Generally, under New York State law, the person deemed “responsible” for collection of the sales tax will face potential liability.
In recent years, the IRS, U.S Attorney’s Office, and the U.S. Departments of Treasury and Justice have been expending considerable effort and resources to locate, fine, tax, and prosecute U.S. businesses and individuals that have been hiding money in unreported foreign financial accounts.