April 15 marks the tax deadline which means the door opens to annual audits and tax disputes. Unfortunately, households earning $25,000 or less receive more frequent audits than any other tax bracket up to over $500,000.1 In other words, low income taxpayers face more scrutiny from the IRS than middle and upper-middle class earners. Read on to learn more about what you should claim as a low income taxpayer and your options for tax disputes.

 

What Is the Earned Income Tax Credit?

Low income households often qualify for the Earned Income Tax Credit (EITC). However, data shows taxpayers claiming the EITC have a higher audit rate. This means more disputes for people who are less likely to be able to afford a tax attorney. 

 

The EITC applies to lower income earners and offers a tax credit based on income and number of children. Low income earners with more children receive the highest credits. For 2020, the EITC ranges from $538 to $6,660.2 

 

The intent of the EITC is to lower the tax burden for lower income earners; however, due to actual or perceived fraud risks, the IRS monitors the tax filings for EITC taxpayers more closely. Therefore, it is important that you provide all of the proper documentation. If you cannot prove that you are entitled to what you claimed, the IRS can ban you from receiving the EITC for two to ten years, potentially costing you thousands.

 

IRS Appeals Process

If you are involved in a tax dispute, the IRS offers an appeal process to resolve those. Collection Due Process (CDP) occurs when a taxpayer receives notice that the IRS plans to collect on unpaid taxes. However, taxpayers usually have a 30-day window to request a CDP hearing to appeal the ruling.

 

The CDP allows taxpayers to appeal a notice of federal tax lien or a notice of intent to levy your property before collection begins. During the period of the pending CDP hearing, a hold occurs on the collection process. This also marks the start of the 10-year statutory period in which the IRS must collect your taxes. The hearing results in a notice of determination, which is appealable in court. 

 

If the taxpayer misses the deadline to request a CDP hearing, then they may apply for an Equivalent Hearing (EH) since it deals with the same issues. The deadline is one year from the intent to levy or tax lien date listed. During the EH hearing process, collections are not on hold. A decision letter will be issued and isn’t appealable. The only exception is for spousal relief abatement of interest or timeliness of the request for a CDP hearing.

 

The Collection Appeals Program (CAP) process is extremely fast. To request a hearing, first schedule a conference with a collection manager. If you disagree with their decision, you may request a CAP hearing using IR Form 9423. While a CAP hearing is pending, the collection process is on hold. After the hearing, the final decision is not appealable in a court.

 

What Is Taxpayer Advocate Service?

Sometimes the appeals process is complicated or tax problems are unable to be resolved through normal avenues. That’s where the Taxpayer Advocate Service (TAS) comes in. The TAS falls under the umbrella of the IRS but acts as an independent organization. The organization helps individuals and businesses suffering from hardships with tax assistance to resolve disputes. 

 

Not everyone qualifies for help through the Taxpayer Advocate Service. Eligibility is based on whether individuals are experiencing economic harm or significant cost, have experienced a delay of more than 30 days to resolve the tax issue, or haven’t received a resolution by the date the IRS said you would.

 

What Different Types of Issues Can TRLS Help With?

At Three Rivers Legal Services, we can provide free legal help when the IRS threatens to take your home or garnish your wages, when someone has used your identity to file a fake return, or when the IRS audits you. We help with a variety of tax disputes for low income taxpayers, such as: 

 

  • Offer in Compromise
  • Currently Not Collectible Status
  • Installment Agreements
  • Refund Claims
  • Substantiate Earned Income Tax Credit, Other Credits and Deductions
  • Audits/Examinations
  • Innocent Spouse Relief (preventing liability for spouse’s tax debt)
  • Injured Spouse Relief (tax return offset for debt of spouse)
  • IRS Levies and Liens
  • Cancelled Debt Treated as Income
  • US Tax Court Representation
  • Collection Due Process (CDP) and Equivalent Hearings (EH)
  • Collection Appeals Process (CAP)
  • Negotiate with Office of Appeals and IRS Counsel 

 

Eligibility is based on: household income, assets, family size, and availability of legal counsel. We do not offer tax preparation services. The only exception is for cases involving a tax dispute. 

 

Contact TRLS for Assistance with Your Tax Dispute

As you can see, the process to fight tax disputes with the IRS includes complex procedures and, in most cases, requires the assistance of a tax expert. Three Rivers Legal Services can help! We offer taxpayer advocacy services to low-income Florida residents in several counties in Northeast Florida.

 

Call today to schedule an appointment to talk to one of our attorneys and see if you qualify for assistance. You are not alone with your tax dispute. Reach out today!

 

Sources:

  1. IRS, “Internal Revenue Service Data Book.” 2018.
  2. Nerdwallet, “Earned Income Tax Credit (EIC): What it is and How to Qualify in 2019-2020.” 2019.