Tax rules and the obligations the latter create are more complicated and are always evolving. Plus, they reach into all areas of a taxpayers' life,including business affairs. Disputes with the Internal Revenue Service (IRS) regarding your personal taxes or the taxes of your business are not uncommon. What's also not uncommon are suffering the consequences of an IRS dispute because the taxpayer did not know how to negotiate or what they could negotiate to arrive at a favorable settlement or resolution.
At the Law Offices of Trent Nichols, our tax attorney in Texas can help improve your chances of winning a tax dispute case by helping you understand the rules and developing a strong strategy. We navigate obstacles and find alternate ways out of the legal maze created by IRS tax disputes. Contact us today at (361) 594-5004 in Shiner or at (361) 798-3217 in Hallettsville to schedule a consultation and to learn more about how we can proactively help you avoid future IRS disputes while helping you negotiate or, if necessary, litigate for an acceptable resolution.
Overview of IRS Tax Disputes
The IRS may audit your taxes or investigate them after they suspect or were given reason to believe a tax issue exists. When the IRS finds that you or your business did not properly comply with tax rules and regulations, then it will inform you of the same. Upon knowledge of the tax issue, you can have options. Oftentimes, people or businesses do not agree and dispute the claims made by the IRS.
Through settlements and litigation, the IRS recovers billions of dollars a year in unpaid returns and untimely filed returns. That said, many disputes get resolved with the taxpayer paying less than what they owed, but it is all a process that takes specialized knowledge of tax law, solid skills to negotiate persuasively, and patience to finalize a good remedy. That's how our tax disputes lawyer in Texas will benefit you if you have a pending tax dispute: We know the law, will negotiate strategically, and have the persistence necessary to obtain a favorable outcome.
10 Common IRS Tax Issues Leading to Disputes
In their annual report to Congress, the National Taxpayer Advocate identifies the ten most commonly litigated tax issues.
1. Failure to Declare Gross Income
Taxpayers are required to declare various types of income in their federal tax returns, including wages, dividends, bank interest, and property-related income. Disputes often arise when a taxpayer fails to declare a relevant source of income or where a taxpayer disputes what is and isn't counted as gross income.
2. Trade or Business Expenses
Individuals and businesses can deduct certain business-related expenses from their tax returns, reducing their tax liability. However, issues around this can arise when a taxpayer claims unallowable expenses or fails to keep proper records of their expenses, or separates personal from business use of certain assets.
3. Charitable Donations
Like business-related expenses, taxpayers can also make deductions related to charitable donations to qualifying organizations. There can be disputes over whether a recipient is a qualified organization and whether the donation represented fair market value, as well as the taxpayer failing to keep enough supporting documentation.
4. Collection Due Process (CDP) Hearings
CDP hearings allow taxpayers to request an independent review by the IRS Office of Appeals of a lien or levy imposed by the IRS. For example, a taxpayer may disagree with the amount of the tax debt and dispute the outcome of this review.
5. Failure to File
When taxpayers do not file a tax return, but the IRS believes they should have and claims the same, taxpayers may contest a penalty imposed for failing to file a timely tax return.
6. Failure to Pay Taxes
Failure to pay taxes owed to the IRS may lead to further penalties and interest. In some cases, a taxpayer then ends up owing much more than just their tax debt. Taxpayers may contest the imposition of these penalties.
7. Family Status Issues
Disputes between a taxpayer and the IRS may arise in relation to family status issues concerning decisions on filing status, earned income tax credit, and child tax credit.
8. Schedule A Deductions
Schedule A is used for itemized deductions, including medical and dental expenses, state and local taxes, and mortgage and home equity loan interest. Like other deductions, disputes may arise over what qualifies as a Schedule A deduction or where the taxpayer fails to keep supporting documentation.
9. Whistleblower Award Determinations
In certain cases, the IRS Whistleblower Office offers monetary rewards to people who provide information that leads to judicial or administrative action against another taxpayer. Potential whistleblowers can challenge the IRS's decision in relation to this monetary reward.
10. Innocent Spouse Relief
Where two taxpayers file a joint return, one may be able to claim innocent spouse relief from liability if they can prove their spouse or ex-spouse should be held fully liable. Taxpayers can contest the IRS's determination of whether full or partial innocent spouse relief applies.
Tax Dispute Resolution in Texas
Resolving a tax dispute is in everyone's interests. It's how you go about resolving it that sometimes makes a difference – but that is also dependent on the facts and circumstances of the dispute and how strongly one party feels about their side of the argument.
Tax disputes can sometimes be resolved through discussions and negotiations between the taxpayer and the tax authority. This is the most common way of resolving tax disputes and is referred to as administrative resolution. It is usually done through communication with tax officials or administrative bodies.
Alternatively, some parties prefer to use other methods to resolve tax disputes outside of the court system, like mediation, arbitration, or conciliation, with the former two methods the most widely used forms of alternative dispute resolution (ADR). This approach is often used to save time and money, and it can be a more collaborative and less adversarial approach to resolving disputes.
As a form of ADR, mediation is available where the parties dispute a factual issue. During mediation, an impartial, third-party mediator helps the parties discuss the issue to try to reach a settlement. Unlike arbitration, the outcome of the mediation is non-binding on the parties. Mediation is also a confidential process.
As another form of ADR, arbitration may also be available to the parties of an IRS tax dispute in Texas. Like meditation, arbitration tries to resolve a dispute between the parties over a factual issue. To proceed, the parties must submit a motion to the Tax Court, agreeing—among other things—that they will be bound by the outcome of the arbitration.
When all else fails, litigation may be the necessary course of action. Litigation involves taking the tax dispute to court, where a judge or jury will decide on the outcome of the dispute. This approach can be costly, time-consuming, and adversarial. Fortunately for our clients, most tax disputes are settled before without requiring litigation.
However, when litigation is used and one party wishes to challenge the tax authority's decision, they can do so through an appeals process. This process involves submitting a formal appeal to a higher authority, such as a tax tribunal or an administrative body, to review the decision made by the lower-level tax authority.
The way tax disputes are resolved varies depending on the ever-changing tax laws, regulations, and procedures. It is always best to seek professional advice from a tax lawyer when dealing with tax disputes.
How Can a Tax Lawyer in Texas Help You in a Tax Dispute?
When a person only owes a short amount of money to the IRS, they may be able to negotiate the terms of paying that amount on their own. It is when a lot of financial resources are at stake that a taxpayer – whether an individual or business – will benefit the most from a resourceful tax disputes lawyer.
Some ways we can help resolve tax disputes are through:
- Securing payment plans for taxpayers unable to pay immediately
- Qualifying taxpayers for offers in compromise where we get the IRS to settle for less than the full amount owed
- Upholding and protecting clients' rights when audited by the IRS
- Removing or lowering penalties on client tax bills via penalty abatement
- Securing IRS wage garnishment and levy releases to minimize economic hardship
- Proving that you cannot afford to pay your taxes so that your account is placed in Currently Not Collectible status
- Helping clients file tax returns for previous tax years
- Securing the release of a Federal tax lien on property – property subject to potential Federal tax liens include financial assets, homes, vehicles, boats, and other personal property
If you are disputing or need to dispute a tax issue, it is always in your best interest to speak to a tax lawyer. At the Law Offices of Trent Nichols, our tax attorney will review your case including your tax returns and allegations made by the IRS. We will provide you with a solid strategy to resolve the tax dispute while protecting your rights and interests.
Contact a Tax Attorney in Shiner and Hallettsville Today
When a tax dispute arises, it is best to address it with a solid understanding of the law alongside a smart strategy to resolve the dispute. Working with a tax attorney who has knowledge of the process and available remedies can be critical to a successful resolution. Contact our tax attorney in Texas today to schedule a consultation. We can be reached by calling us at (361) 594-5004 in Shiner or at (361) 798-3217 in Hallettsville or by completing the online form.