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IRS Audit – Steps For The Determination Of Collectivity And Separation Of Joint & Several Liabilities

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The IRS conducts the audit with the objective of verifying the tax return accuracy and ensures that the taxpayers have complied with the laws regarding the payment of taxes. Though for the majority of the people the act of getting audited is a matter of fear, the purpose of auditing does not necessarily mean the payment of fines and penalties or escalating the liability towards the payable taxes. Rather, by undergoing the audit a taxpayer can ensure that he/she is complying with prevailing laws and thus, attain peace of mind. On the other hand, if the taxpayer is yet to achieve 100% compliance, IRS audit will pinpoint on such flaws and guide the concerned party to achieve complete compliance.

How does the audit determine the collectivity for an account?

In instances of determining the collectivity owed to an account for offering a compromise, the following factors are given consideration:

  • It is not possible to locate the taxpayer.
  • The auditor is not able to evaluate the assets and finances of the taxpayer.
  • The taxpayer dies and no possibilities of the further collection are feasible from the deceased estate.
  • LLC, Exempted Organizations, and Corporations that got liquidated due to bankruptcy. Alternatively, such organizations get to an inactive stage with noncollectable assets or not having sufficient assets for repaying the debt.
  • In instances of the taxpayer’s deployment in a combat zone.
  • In instances, the taxpayer is suffering from such hardships that the payment of the tax will make it impossible for him/her to run the necessary living expenditures.

In some instances, the auditing authority might feel it fit to offer a partial waiver to the taxpayer and give him/her the chance to clear the dues in installments. In such cases, the taxpayer will have to sign the IRS installment agreement form and pay the dues in installment, as scheduled in the agreement.

How to file an application for separating the liability relief?

For those taxpayers who are filing the income tax return jointly with their spouse, are eligible to hold responsible for the payment of taxes due, if any. This is known as Joint & several liabilities. This is possible that it applies to any tax, determined by the IRS, over and above the return, no matter what tax is from deductions, income, or credits.

For any ambiguity regarding the IRS audit, it will be wise to seek consultation and guidance from an able lawyer.