Tax Disputes

These are disagreements between a taxpayer and a tax authority, such as the IRS, over the amount of tax owed or other aspects of the tax return. Freelancers may engage a tax professional to assist in resolving disputes.

What is a tax dispute?

A tax dispute is a disagreement between a taxpayer and a tax authority over the amount of tax that is owed or the interpretation of tax laws. This can arise from a variety of reasons, such as a disagreement over the amount of income earned, the classification of income or expenses, or the eligibility for certain tax credits or deductions.

When a tax dispute arises, the taxpayer has the right to challenge the tax authority's decision through an administrative appeal or by filing a lawsuit in court.

How can I resolve a tax dispute with the IRS?

If you have a tax dispute with the IRS, there are several options available to you. The first step is to try to resolve the dispute through an administrative appeal. This involves submitting a written protest to the IRS explaining why you disagree with their decision and providing any supporting documentation.

If the administrative appeal is unsuccessful, you may be able to resolve the dispute through alternative dispute resolution (ADR) methods such as mediation or arbitration. These methods can be less formal and less expensive than going to court.

If all else fails, you may need to file a lawsuit in court to challenge the IRS's decision. This can be a lengthy and expensive process, so it is important to consult with a tax attorney before taking this step.

What are some common tax disputes?

Some common tax disputes include disputes over the classification of income or expenses, disputes over the eligibility for certain tax credits or deductions, and disputes over the amount of income earned.

For example, a taxpayer may dispute the IRS's classification of income as ordinary income versus capital gains, which can have a significant impact on the amount of tax owed. Similarly, a taxpayer may dispute the IRS's denial of a tax credit or deduction, such as the home office deduction or the child tax credit.

What should I do if I receive a notice of deficiency from the IRS?

If you receive a notice of deficiency from the IRS, it means that the IRS has determined that you owe additional taxes and has proposed an assessment. You have the right to challenge this assessment by filing a petition in Tax Court within 90 days of the date of the notice.

It is important to act quickly and consult with a tax attorney if you receive a notice of deficiency, as the consequences of not responding can be severe, including the assessment of additional taxes, penalties, and interest, as well as the possibility of wage garnishment or bank levies.

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