Dealing with IRS disputes or state tax controversies can be stressful and confusing. Even innocent mistakes can lead to serious financial consequences. The key to a successful resolution is understanding your rights and seeking professional guidance before issues escalate. Whether you’re facing an IRS tax audit, unpaid tax debt, unfiled tax returns, tax liens, or levies on your bank accounts, knowing your options can save you time, money, and stress.
At McDowell Law Group, our professionals help clients navigate tax audits, federal and state tax collections, appeals of audit or examination determinations, and litigation where necessary. With offices in Virginia and North Carolina, our experienced attorneys and CPAs offer personalized solutions to protect your financial future.
Here are the top seven tax resolution mistakes, and how to avoid them.
1. Ignoring IRS Notices
Why It’s a Mistake: Ignoring IRS letters won’t make the issue disappear. Instead, it will lead to increased penalties and interest, and can quickly escalate to wage garnishments, liens on your assets, and levies on your bank accounts.
How to Avoid It: Always read and respond to IRS notices and letters from state taxing agencies immediately. These notices rarely convey welcome news as they often inform you about an outstanding tax debt, but you must open the mail and read the notice!
These notices inform you of your rights and important deadlines. This is especially appropriate for any taxpayer who is behind in filing their tax returns, owes back taxes, or is already experiencing the collections efforts of the IRS. For those in these situations, the IRS provides important information and deadlines concerning your tax liability, payment options, and your right to a hearing, which is critical if you think the tax assessed is incorrect. You do not want to lose your opportunity to dispute the assessment. Ignoring these notices often leads to greater liability and increased collections efforts.
The tax professionals at McDowell Law Group can communicate directly with the IRS or state agency on your behalf to halt collection efforts and negotiate a resolution that protects your interests.
2. Missing Tax Return Filing and Tax Payment Deadlines
Why It’s a Mistake: Missing tax filing or payment deadline can result in late filing and/or late payment penalties and interest charges (interest on debts owed to the IRS is currently at 8%).
If you are already in a collections situation, ignoring notices and failing to communicate with the IRS or state agency can result in the loss of your right to be heard or appeal a tax assessment that you disagree with.
How to Avoid It: Always file your tax returns on time, even if you cannot afford to pay the tax due. If you fall behind on your tax payments, seek help in setting up an installment payment plan. Setting up an installment payment plan with the IRS is a much better option than the possible consequences of non-filing.
Don’t wait for the IRS to determine that you are a non-filer. The willful failure to file tax returns is actually a criminal misdemeanor under the Internal Revenue Code. Although filing of criminal charges is not common, assessing additional civil penalties against non-filers is quite common.
If you are struggling to keep up, you can seek legal assistance from McDowell Law Group, where our professionals can ensure timely return filings and responses to collections efforts.
3. Failing to Keep Proper Records
Why It’s a Mistake: Poor documentation can make it difficult to prove deductions, credits, or income adjustments, leading to an unfavorable IRS adjustment to your tax return and assessment of additional tax.
How to Avoid It: Keep detailed financial records, including receipts, tax returns, and IRS correspondence. This is a requirement under the Internal Revenue Code. Place them in a safe area of your home, and make sure to create duplicates. If you need assistance organizing tax documents or preparing for an audit, McDowell Law Group offers expert tax planning services to keep you compliant.
4. Agreeing to an IRS Settlement Without Understanding Your Options
Why It’s a Mistake: The IRS does not always have all the information about your tax situation. When the IRS makes a change to a tax return or assesses additional tax, they are doing so based on the information they have, which might not be complete. Failing to respond to IRS notices or requests for additional information can result in an incorrect assessment. When faced with an additional tax assessment, some taxpayers accept IRS assessments without knowing all of the options available to them. they could negotiate better terms, resulting in unnecessarily high payments.
How to Avoid It: Read the notice! If it doesn’t make sense, or you think it could be incorrect, seek the help of a tax professional. Before agreeing to a settlement, explore options such as installment agreements, offers in compromise, or penalty abatement. There may be a better option than the one that is first presented. Understanding your options can be confusing, but McDowell Law Group can evaluate your case and negotiate a fair resolution on your behalf.
5. Failing to Appeal an Unfair Decision
Why It’s a Mistake: Many taxpayers don’t realize they can dispute an IRS decision, missing the chance to reduce or eliminate tax liabilities.
How to Avoid It: If you disagree with the IRS, file an appeal before the deadline. Not all cases will be changed, but it is worth asking for another review. The tax controversy lawyers at McDowell Law Group can review your case, present strong legal arguments, and help you fight for a fair outcome.
6. Neglecting to Set Up a Payment Plan for Tax Debt
Why It’s a Mistake: The IRS is not a normal creditor. They will not wait for you to pay your outstanding tax liability. Failing to address payment of your tax debt with the IRS will lead to collection actions, including bank levies, liens on properties, and in rare cases, property seizures.
How to Avoid It: Aggressive collection actions only result if you ignore the IRS, so it is important to start a dialog with them immediately. If you can’t pay your tax liability in full, set up an installment agreement or explore other relief options.
An installment agreement is simply a payment plan with the IRS to pay the taxes you owe within an set number of months. An installment agreement is an option if you believe you will be able to pay your taxes in full within the extended time frame. You can set up a payment plan that works better for your budget. Our tax professionals can guide you through the process and negotiate manageable payment terms.
7. Representing Yourself Without Professional Help
Why It’s a Mistake: IRS disputes can be complex, and attempting to handle them alone may lead to costly errors.
How to Avoid It: Hiring a tax controversy lawyer or IRS tax audit attorney ensures that you have a professional advocating for your best interests. Money is lost each year due to people misunderstanding the tax laws. McDowell Law Group, serving Virginia and North Carolina, provides experienced legal representation to help taxpayers resolve disputes efficiently.
IRS disputes don’t have to be overwhelming. Avoiding these common mistakes can improve your chances of a favorable resolution. If you need help responding to an IRS notice, appealing a decision, or negotiating a settlement, McDowell Law Group offers the expertise you need.
Contact McDowell Law Group today to schedule a consultation with a skilled tax controversy lawyer or IRS tax audit attorney. The sooner you take action, the better your chances of successfully resolving your tax issues.