Pre-filing Agreement: Everything You Need to Know

A pre-filing agreement is a legal agreement between a taxpayer and the IRS that aims to address any tax issues before the taxpayer files their tax return. It is an important tool for taxpayers who want to resolve any tax disputes before they escalate into more serious problems. In this article, we will discuss everything you need to know about pre-filing agreements.

What is a Pre-filing Agreement?

A pre-filing agreement is a contract between a taxpayer and the IRS that aims to resolve any tax disputes before the taxpayer files their tax return. This agreement helps taxpayers avoid penalties by addressing any tax issues, including audit or examination, before the taxpayer submits their tax return.

Through a pre-filing agreement, taxpayers can settle tax disputes with the IRS on a voluntary basis. Such agreements may cover issues such as tax liability, tax assessment, penalties, and interest. It is important to note that a pre-filing agreement does not prevent the IRS from conducting audits or examinations after the taxpayer files their tax return.

How Does a Pre-filing Agreement Work?

A pre-filing agreement usually starts with the taxpayer submitting a request to the IRS. After receiving the request, the IRS conducts an assessment of the tax situation and determines whether a pre-filing agreement is appropriate. If the IRS agrees to participate in a pre-filing agreement, the taxpayer and the IRS will negotiate the terms and conditions of the agreement.

The agreement may include the amount of the tax liability, the length of time for the agreement, any specific terms or conditions, the payment schedule, and the consequences if the taxpayer fails to comply with the agreement. Once the agreement is signed, the taxpayer must adhere to all the terms and conditions or risk penalties or enforcement action from the IRS.

Benefits of a Pre-filing Agreement

There are several benefits of entering into a pre-filing agreement with the IRS. First and foremost, it allows taxpayers to resolve any tax disputes before they escalate into more serious problems. This can save taxpayers time and money in the long run.

Secondly, pre-filing agreements can help taxpayers avoid costly penalties, which can add up quickly over time. By addressing tax issues before filing their tax return, taxpayers can avoid penalties such as late filing penalties or failure to pay penalties.

Finally, pre-filing agreements can improve relations between the taxpayer and the IRS. By working together to resolve any tax issues, both parties can establish a good working relationship, which can lead to more productive interactions in the future.

Conclusion

A pre-filing agreement is an important tool for taxpayers who want to resolve any tax disputes before they escalate into more serious problems. By negotiating with the IRS before filing their tax return, taxpayers can save time and money in the long run. Additionally, they can avoid costly penalties and improve relations with the IRS. If you are experiencing any tax issues, consider entering into a pre-filing agreement with the IRS.