When dealing with the IRS, timely communication is key. This is especially true when it comes to demonstrating good faith. No one likes being ignored, including the IRS. While the government’s response times can be glacially slow, they still appreciate and take note of taxpayers who communicate promptly and transparently.
1. Building Trust with the IRS
Demonstrating good faith is about building trust. When you respond promptly to IRS notices, inquiries, or requests for information, you show that you are serious about fulfilling your tax obligations. This proactive approach shows the IRS that you are willing to cooperate and not trying to evade your responsibilities. This can lead to more favorable treatment, as the IRS is more likely to work with you to resolve any issues.
2. Avoiding Aggressive Collection Actions
If the IRS doesn’t hear from you, they may assume you’re unwilling to pay your taxes. This can trigger aggressive collection actions like liens, levies, or wage garnishments. These actions can severely impact your financial stability and credit score. However, communicating with the IRS early and showing good faith can often prevent these actions. The IRS is more likely to grant additional time or negotiate a payment plan if they see that you are trying to resolve your tax issues.
3. Potential for Penalty Abatement
Another advantage of demonstrating good faith is the potential for penalty abatement. The IRS may waive penalties if you have a reasonable cause for not paying your taxes on time or filing late. This is more likely if you have a timely communication and cooperation history. Showing you’ve been responsive and proactive can strengthen your case when requesting penalty relief.
4. Facilitating Better Communication
Timely responses help facilitate better communication between you and the IRS. This can be especially important if your tax filings have misunderstandings or errors. By responding quickly, you can clarify discrepancies and ensure your records are accurate. This can prevent minor issues from escalating into more significant problems.
5. Enhancing Your Negotiating Position
You enhance your negotiating position with the IRS when you demonstrate good faith. If you need to negotiate an Installment Agreement or an Offer in Compromise, showing that you’ve been responsive and cooperative can work in your favor. The IRS is more likely to consider your proposal seriously if they see that you have a good faith communication track record.
In conclusion, demonstrating good faith through timely communication with the IRS is crucial in managing your tax affairs effectively. While it’s true that the government’s idea of a timely response can be slow, your proactive approach can make a significant difference. By staying responsive and transparent, you build trust, avoid aggressive collection actions, potentially qualify for penalty abatement, facilitate better communication, and enhance your negotiating position. So, if you receive any correspondence from the IRS, make it a priority to respond promptly – your financial health and peace of mind may depend on it.
