Dear Bonnie, I have some tax problems and find that I will soon have to deal with the people at the IRS. Needless to say, I’m terrified. Do you have any good advice for me?
– Susan P, Sonoma
Dear Susan, I’ve got plenty of good advice. After all I’ve been dealing with the folks at the IRS for more than two decades. A little secret: Most of them are really nice and understanding. In recent years they’ve suffered along with taxpayers over budget cuts and are frustrated with the level of customer service they’ve been forced to supply. And know that you aren’t alone, Susan. From time to time every taxpayer will have to go head to toe with the IRS. Whether you are setting up an installment agreement, facing the auditor from hell, resolving a misunderstanding, or dealing with collectors on the phone or worse yet, on your doorstep, you would be well advised to heed the following suggestions.
1) You get more flies with honey. Remember what Mom used to say! Dealing with bureaucracy can be very frustrating. But park your bad attitude and anger at the door. Take a deep breath, demonstrate a cooperative attitude, and proceed in an orderly fashion to resolving your issue. I have found that most IRS personnel are compassionate humans that bend over backwards to find ways to resolve issues and help taxpayers. It’s true! It’s not like you won’t ever run into that power-hungry, condescending, surly agent from time to time. And if you do, you can always trade up to a more understanding and respectful model. Just ask for the manager.
2) Use IRS lingo. When you use IRS lingo the person you are speaking with will find you knowledgeable and may treat you with a little more respect. Here is some verbiage you may find useful:
– Ask for penalties to be “abated” rather than removed.
– Tell them, if it’s the case, that your failure to (pay or file or comply with a document request) was due to “reasonable cause.” Use this term if you didn’t just flake and have a good reason, which could include such things as unemployment, losing your records, losing your home, health problems, etc.
– If you can’t pay a tax bill because you are suffering financial reversals you can ask to be deemed “Currently not collectible.” If you are granted this status, they will leave you alone for an entire year while you get it together.
– If you feel a spouse or former spouse should be responsible for a tax matter, ask to be treated as an “Innocent spouse.” There are certain criteria to this status. Do some research or discuss the issues with your tax pro.
– If defending business deductions during an audit, the term “ordinary and necessary” business expense will help – but only if that’s really the case.
3) Don’t talk too much. IRS agents are trained to draw as much information from you as possible. Answer questions truthfully, but keep your answers short, succinct, and to the point. There is no need to elaborate or discuss your personal life or disclose too much. This will only lead to misunderstandings and possible further investigations.
4) Always tell the truth. Lies have a way of uncovering themselves. Once you are caught in a lie, you will always be suspect. And when you are suspect, you lose the cooperation you would normally receive. Don’t hide assets, don’t run for cover. There are many ways to resolve tax problems using a straightforward and honest approach.
5) Only make promises you can keep. This is especially true when it comes to paying your liability. If an IRS agent asks you if you can pay $200 per month on a tax balance and you know that you can only afford $100, tell him so. Indicate that you will try to pay extra when you can. But you are not going to set yourself up for failure by promising to pay more than you are able. Throw that in with the fact (if it’s the case) that you have always timely filed and paid liabilities in the past and now you need a break. Note that this will not work if their analysis of your financial situation indicates you can pay more.
6) Go to them before they come to you. If you are unable to keep a promise you make, call them and let them know immediately. They are usually so happy with the cooperation they will likely grant you the extensions you need. The collections department notes your file whenever you or your representative calls; your history with them is a matter of record.
7) Stop the interview. If at any time during an audit or a phone conversation you feel intimidated, disrespected, or out of your depth, simply say so and end the interview. Tell the IRS that you will be seeking representation and will get back with them soon. This will give you a chance to take a deep breath and discuss the matter with your tax pro. If you felt disrespected, you can always request a different auditor. Or if it was a matter of a surly customer service rep you were speaking with on the phone, you can end the call and call again in hopes of getting someone kinder or a little more understanding.
If you do not want to venture forward to deal with the IRS, speak to your tax professional about representing you. You can sign an IRS Form 2848 Power of Attorney assigning this duty to your tax professional and need never speak to an IRS agent again.
Bonnie Lee, of Sonoma’s Taxpertise, represents taxpayers in tax problem resolution, tax preparation, tax planning, and to help non-filers safely re-enter the tax system. She is the author of “Taxpertise, The Complete Book of Dirty Little Secrets and Hidden Deductions for Small Business that the IRS Doesn’t Want You to Know.” If you have a tax question, contact her at 935.1755 or Bonnie@taxpertise.com.
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