Tax Assessment Process
Before the IRS or State can legally collect taxes from you, the balance owed must be properly assessed against you. As a self-declared tax scheme, assessment is accomplished when you file your tax return. Your self-declaration, lets the IRS them know how much you owe in taxes, after you declare your income after you take into account all deductions, adjustments and credits applicable to you.
If you fail to file a tax return, the IRS will calculate your taxes for you based on income provided by third parties, without any regard to deductions. This process called a substitute for return can vastly overstate your taxes because the IRS does not give you credit for any deductions. If you are audited and the IRS proposes adjustment, you will have the opportunity to consent for of contest the proposed assessment. This process will play out with the IRS in Appeals or by going to tax court, after receiving a statutory notice of deficiency.
Reducing your Tax Debt
There are various ways to reduce your tax liability, some are easier than others, as the taxpayer can control independent of the IRS. For example, if you have not filed your missing tax return or you can file an amended tax return, this may your reduce your tax burden. Sometimes, the IRS may have asked for supporting information and you missed their deadline. This may be remedied in a process called a reconsideration. The IRS may have imposed penalties, which may be subject to abatement for reasonable cause.
Other ways to reduce your debt perhaps are not so straightforward and involve a great deal of skill and negotiation. They rely on showing how much you can afford to pay over the time the IRS can legally collect from you, given the ten-year statute of limitations. These strategies partial payment plans, offer in compromise and bankruptcy options.