Friday, November 28, 2008

Tax Resolution – State First, Federal Second

Many times I have come across taxpayers who have gone several years without filing their tax returns, both state and federal. Usually the IRS (federal) is the first to contact the taxpayer about the problem. I always advise the taxpayer, after learning they are unfiled for both the federal and the state, to get the state returns filed first and work our a plan of resolution with the state, then file the federal returns and work out a plan with the feds (the IRS) next. The reasoning on this is very sound.

By taking this approach the taxpayer is able to get a plan of resolution in place with the state first. When we go to negotiate with the IRS it is much easier to work out a payment plan with them that includes the payment already being made to the state. If the feds (the IRS) are done first and then we go to the state the individual states are not very flexible and will usually not be very agreeable to a reasonable plan. When consulting with a professional tax resolution consultant take this sound reasoning under advisement. You would do well to do so.

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