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At loggerheads with IRS? Taxpayer Advocate can help

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in Small Business Tax Deduction Strategies

If you just can’t seem to get anywhere with the IRS, and the agency’s action (or lack of action) will cause your company to suffer a significant hardship, you may be able to get a Taxpayer Assistance Order from the National Taxpayer Advocate (NTA). Final regulations, which became effective April 1, 2011, allow the NTA to intervene on taxpayers’ behalf.

Key: Taxpayer Assistance Orders aren’t substitutes for administrative appeals or court cases, but they can stop the IRS from playing pingpong with your case. (76 F.R. 18059, 4-1-11)

NTA to the rescue

The NTA is an independent branch of the IRS. The final regs define the scope of its power to issue Taxpayer Assistance Orders, which the IRS must obey. Requests for a Taxpayer Assistance Order are made on Form 911. Orders may direct the IRS to release a levy, take specific actions regarding collection or force it to expedite, review or reconsider an action at a higher level.

Under the regs, an order may be issued if you are suffering or are about to suffer a significant hardship as a result of how the IRS is administering the tax laws. You may suffer a significant hardship if there’s an immediate threat of adverse action, irreparable long-term injury may result, you’ve waited longer than 30 days for the IRS to resolve your problem or you will incur significant costs, including fees for professional advice.

Example: The IRS sends SmallCo a notice penalizing it because it’s $10,000 short on its payroll deposits for 12 quarters. SmallCo provides documentation to the IRS showing that the IRS misapplied the deposits, and that if the deposits had been applied properly, no liability would exist. The IRS requests additional documentation. Since 12 quarters are at issue, SmallCo asserts that it would have to spend $80,000 to hire an accountant. SmallCo, therefore, would face significant costs.

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