IRS Controversy, Tax Debt Relief, and More: How We Can Help

IRS disputes can be intimidating and overwhelming, and building an effective case to support your position is a complex process. If you must face the IRS — because you are struggling with delinquent taxes, being audited, facing current penalties and owed interest, or otherwise — you need knowledge and experience on your side.

Here are a few of the most common questions we receive regarding IRS controversy and tax debt relief.

What if you received an IRS notice related to prior year taxes owed?

Pay the amount due in full.
Request an installment agreement (over 72 months, balances due under $250,000) if you cannot pay in full.
Disclose your financial information to determine your ability (or inability) to pay the taxes if you cannot pay in full (over 72 months). For individuals with balances over $250,000, your financial information is required even if you can pay within 72 months.

Who can I trust to advise me on delinquent taxes owed?

Taxpayers dealing with delinquent taxes can often feel unsure who to trust. Many end up turning to the one person they do trust regarding taxes: their accountant. This is especially true if a long-standing and close relationship with their CPA has already been established. Your CPA, paired with our IRS Dispute Resolution & Collections team, can be a powerful combination when you are dealing with a delinquent tax problem.

Pairing your CPA with a team of professionals that specialize in IRS dispute resolution and collections work will help:

Ensure optimal results. An experienced team can get the right payment plan established. A good team can also mean the difference between an accepted settlement agreement and a rejected one.
Meet collections deadlines. There is limited time provided by the IRS in collections due process matters. When those deadlines are disregarded, the IRS moves forward with their collection process, resulting in levies and other collection measures. An experienced team knows how to manage the collection deadlines.
Negotiate your case. An IRS collections agent’s job is to collect money as quickly and efficiently as possible. Therefore, they appreciate working with an experienced team who knows IRS rules and can negotiate them on your behalf.
Reduce the cost. Working with an experienced team provides a timelier resolution. The sooner a case gets resolved, the less it will cost you.

What should I do if I made a tax payment but receive a balance due notification?

If you made a payment to the IRS, allow time for the payments to be input and processed. When that happens, a revised tax notice will be issued.
Do not place a stop payment on the tax payment check. That will only increase the risk of interest and penalties since the check could not be processed.
Checks received by the IRS will be posted to a taxpayer’s account based on the “Mailbox Rule.” The Mailbox Rule basically says that a return, a claim for refund, a payment due, etc. is considered timely filed or paid if deposited into the hands of the U.S. Postal System in an envelope (or other acceptable packaging), properly addressed with the required postage paid, and posted on or before the due date of the item being submitted. If all this is properly done, the postmark date is deemed the date of delivery or payment. Returns or payments filed outside the United States or utilizing a designated private delivery service can also make use of the Mailbox Rule.

What if I receive an IRS notice that my tax return was selected for examination?

If your tax return is under IRS examination, it is highly recommended that you gather the necessary documentation to substantiate your income and deductions and seek representation. If your income was underreported by 25%, the IRS can expand the scope of the examination from one tax year to three tax years, and if they discover fraud, the IRS can examinate six years of returns.

What are potential IRS audit risk areas?

Without proper due diligence, business owners can find themselves in sticky situations. Compliance is important in every aspect of business, but it’s especially important to pay attention to the current issues that the IRS has in focus.

The items below provide a checklist to help identify whether you or your business might be at risk for one — or more — of the IRS’ high probability audit situations for this year.

Do you make charitable gifts through a donor-advised fund or conservation easement?
IP monetization/royalty transactions, easements, and donor-advised fund transactions are under high IRS scrutiny.

Are you planning to change your compensation structure in light of tax law changes?
The IRS’ position for reasonable compensation is reasonable replacement, which can complicate changes to wages, guaranteed partner payments, or compensation from S corporations.

Do you have a transfer pricing policy in place, foreign assets, or operations?
International transactions are of special interest to the IRS. Returns not filed properly are subject to significant penalties, but requesting penalty relief and filing unfiled returns can alleviate potential penalties.

Do you have a captive insurance company?
Recent U.S. Tax Court cases have emboldened IRS auditors to treat all 831(b) captives as shams.

Do you have more than $10 million in assets?
High net worth individuals are easy targets for an IRS audit and probably will be audited.

Do you have a self-directed IRA?
The IRS is examining SDIRAs to determine if they have violated the unrelated business income tax rules.

Have you recently completed a business or asset valuation or a study?
The IRS will scrutinize the values determined in transactions or require a contemporaneous study.

The Benefit of Working with an IRS Controversy Team

While there are tax relief programs in play, working with the IRS can get complicated quickly. Working alongside a trained tax controversy professional can give you the tax relief help you need.

Here’s how we reduced one client’s tax debt from $1.7 million to $49,728.

When Bill’s business started to struggle, he had hard decisions to make — like whether he should pay the IRS or pay his employees and his operating expenses. What Bill didn’t know when he shut the doors to his business and headed into retirement is that a tax liability can almost double with penalties and interest over the course of ten years. And that’s how Bill, at 70 years old with ailing health and living on social security, found himself owing the IRS $1.7 million.

When the IRS started garnishing Bill’s income, he wasn’t able to pay his bills and medical expenses each month. The IRS demanded that Bill liquidate his assets, but Bill didn’t have the assets to satisfy a debt of $1.7 million.

Bill hired another CPA to try to resolve the debt with two offers in compromise, but the IRS still wanted $400,000 to settle the debt, and that was more than Bill had to offer.

When Bill came to the Eide Bailly IRS Dispute Resolution & Collections team, he was wary that we would be able to find a workable solution. Within nine months, we were able to stop the IRS’s demands for liquidation of assets, end the garnishment on his Social Security Income, and negotiate a Partial Payment Installment Agreement of $592 per month.

Instead of paying $400,000, Bill will only pay $49,728 of his $1.7 million liability.

Here's How We Did It:

A comprehensive financial analysis of Bill’s assets, equity, income, and expenses to determine his ability or inability to pay delinquent taxes.
Presenting Bill with his payment options and choosing the best course of action to resolve the debt. In Bill’s case, the best option was to submit an offer in compromise.
Advocating and negotiating with the IRS on Bill’s behalf until the IRS accepted Bill’s offer to settle his debt.

Eide Bailly has years of experience advocating for clients like Bill in front of the IRS — some of our professionals are even former IRS employees. We know how to help tell your story so the IRS sees your position clearly and can make the correct determinations. With our team on your side, you can face the IRS with confidence.