Dealing with tax debt is one of the most stressful financial challenges individuals and businesses can face. The looming threat of IRS penalties, interest, and potential legal action can create anxiety and uncertainty. Tax debt can arise from various situations, including underreported income, unfiled tax returns, or discrepancies found during an IRS audit.

In such overwhelming situations, the expertise of IRS audit lawyers becomes invaluable. These specialized legal professionals are adept at addressing complex tax laws and regulations. They can provide representation during IRS audits, and negotiate resolutions to minimize the financial burden on their clients. IRS audit lawyers can offer strategic advice and support, ensuring taxpayers understand their rights and options.

Understanding Tax Debt and IRS Audits

Tax debt refers to any unpaid taxes that a taxpayer owes to the Internal Revenue Service (IRS). This debt can accumulate from a variety of sources and circumstances. Common causes of tax debt include:

• underreporting income,
• errors or omissions on tax returns,
• failure to file tax returns on time, or
• simply not having enough funds to pay the owed taxes by the due date.

Penalties and interest can quickly accumulate on unpaid taxes which significantly increase the total amount owed. On the other hand, an IRS audit is a review of an individual’s or business’s financial information and accounts to ensure that tax returns have been filed accurately and in compliance with tax laws.

The primary goal of an audit is to verify the correctness of reported income, deductions, and credits. The IRS conducts audits to identify discrepancies, errors, and instances of tax evasion. There are three main types of IRS audits:

Correspondence Audit:

• This is the most common and least intrusive type of audit.
• It is conducted through mail and typically focuses on specific issues or discrepancies found in a tax return.
• Taxpayers are required to mail the requested documents and explanations to the IRS.

Office Audit:

• Conducted at an IRS office, this type of audit involves a more in-depth examination of financial records.
• Taxpayers are required to bring specific documents to the office for review.
• The audit may cover multiple issues and can be more comprehensive than a correspondence audit.

Field Audit:

• The most extensive type of audit, a field audit takes place at the taxpayer’s home, place of business, or their accountant’s office.
• An IRS agent conducts a thorough review of financial records and operations.
• This type of audit is often used for complex cases involving large amounts of money or intricate financial transactions.

How IRS Audit Lawyers Help with Tax Debt Resolution

IRS audit lawyers provide invaluable assistance in resolving tax debt, offering tailored solutions that address the specific needs and circumstances of each taxpayer. Here are some of the strategies that tax lawyers can do to help you achieve a tax debt settlement:

Negotiating Settlements

One of the primary ways IRS audit lawyers assist with tax debt resolution is by negotiating settlements, such as Offers in Compromise (OIC). An OIC allows taxpayers to settle their tax debt for less than the full amount owed, provided they meet specific criteria. IRS audit lawyers evaluate the taxpayer’s financial situation, including income, expenses, and assets, to determine eligibility.

They prepare and submit the OIC application, presenting a compelling case to the IRS that demonstrates why paying the full amount would cause undue financial hardship. By leveraging their expertise, lawyers increase the likelihood of the IRS accepting the offer, thereby providing a more manageable resolution for the taxpayer.

Installment Agreements

For taxpayers unable to pay their tax debt in a lump sum, IRS audit lawyers can help set up installment agreements. These agreements allow taxpayers to make monthly payments towards their tax debt, spreading the burden over time.

IRS audit lawyers assess the taxpayer’s financial capacity to propose a payment plan that is realistic and sustainable. They negotiate with the IRS to secure the best possible terms, ensuring that the payments are manageable while minimizing additional penalties and interest. With a formal installment agreement in place, taxpayers can avoid more severe collection actions, such as wage garnishments or bank levies.

Penalty Abatement

Penalties and interest can significantly increase the amount of tax debt owed. IRS audit lawyers can assist in the process of penalty abatement, which involves reducing or eliminating these additional charges. To qualify for penalty abatement, taxpayers must typically demonstrate reasonable cause for their failure to comply with tax obligations.

Tax attorneys gather the necessary documentation and craft a persuasive argument to show that the taxpayer’s failure was due to circumstances beyond their control, such as serious illness, natural disasters, or other significant life events. 

Innocent Spouse Relief

In cases where one spouse is held responsible for tax debt due to the actions of the other, IRS audit lawyers can help clients qualify for innocent spouse relief. This relief protects individuals who filed joint tax returns but were unaware of errors or omissions made by their spouse. They assess the situation to determine eligibility for innocent spouse relief, which can absolve the innocent party from joint liability for the tax debt.

Conclusion

The expertise and guidance of an IRS audit lawyer are invaluable when navigating the intricate processes and regulations associated with tax debt. Their ability to represent and advocate for clients can make a substantial difference in the outcome of an IRS audit or tax debt resolution. If you are facing tax debt or an IRS audit, it is essential to seek professional help. An experienced IRS audit lawyer from J. David Tax Law can provide the support and solutions you need to address your tax issues effectively and achieve financial stability.