Have you fallen into the “tax gap”?
According to the IRS, the tax gap is “the difference between the amount of tax that taxpayers should pay and the amount that is paid voluntarily and on time.” So, if you have failed to file taxes or you have failed to pay on time, then you are in the tax gap.
The IRS’s ability to collect tax debts exceeds those remedies of other creditors. Unlike other creditors (like credit card companies), the IRS can levy your bank accounts and garnish your wages administratively. That means that after the IRS fulfills procedural requirements it merely sends a letter to the bank or your employer and the money must be sent to the IRS—the IRS does not need to go to court.
How to get out of the gap?
The IRS provides several ways to negotiate a debt, including penalty abatement; collection arrangements including offers in compromise based on doubt as to liability, doubt as to collectability, and effective tax administration; and payment arrangements.
The key to having your offer or abatement letter approved is understanding how the IRS makes its decisions. That includes understanding the Internal Revenue Code, Treasury Regulation, and case law. Making a strong argument—with case law and regulation to support it—are the cornerstones of a good offer letter.
Tags: Failure to File, Failure to Pay, tax