“What are my chances of resolving this without paying anything?”---->I do not know; it depends; to prevent paying tax and penalties you do not owe, you need to respond in writing to the notice using certified mail. Ask that the notice be canceled. Respond within the time stated on the notice to avoid any enforced collection action. As long as you are communicating with the IRS to resolve the issue, the chances of lien, levy or property seizure are greatly diminished.If you have proof that IRS's claims in the notice are incorrect, send the proof via certified mail to the address shown and to the person indicated on the notice. If the IRS ignores your proof, you have the right to appeal that notice just as you have the right to appeal an auditor decision. To appeal a notice you must prepare and send a protest letter asking that the decision be re-examined. If you want to appeal an IRS decision, you must make your appeal within the time limit set by the IRS. If you don't appeal in a timely manner, you may lose the right to appeal. According to the IRS (in Publication 3498), there are two processes for appeals, depending on the total amount of tax, penalty, and interest you owe: Process for Small Cases (Under $25,000)as the amount you want to appeal is $25,000 or less in proposed change in tax, penalties, and interest for each tax period, you can use Form 12203, Request for Appeals Review, available on Internal Revenue Service
, or by calling 1-800-829-3676.and send in a brief written statement requesting an Appeal. Indicate the changes you do not agree with and why you do not agree with them. When the IRS receives your appeal, they will contact you to arrange a conference. You may bring your authorized representative (CPA, tax attorney, or enrolled agent) to the conference. The IRS says, "Most differences are settled at this level." OR You can contact a Taxpayer Advocate; The IRS is complex and inefficient. It is a fact that many people have problems navigating the IRS and getting results. Every year there will be many people that will not be able to resolve their tax problems through the normal IRS channels. The Taxpayer Advocate service was created to help those individuals that have tried resolving their problems on their own and their attempts have failed. For example, if there was a delay of 30 days or more when you tried to resolve your tax problem through normal IRS channels. The employees at the Taxpayer Advocate are trained to better navigate the IRS channels and get answers and results. The normal time to get a tax problem resolved through the Taxpayer Advocate is around 10-30 days, which is excellent compared to the normal navigation channels.
“What are my chances of resolving this without throwing it back at them due to a statute of limitations? “----->As described below; If the IRS doesn't collect the full amount in the 10-year period, then the remaining balance on the account disappears forever because the statute of limitations on collecting the tax has expired. HOWEVER, SOL can be extended by mutual agreement.
“What are those limitations?”------>The statute of limitations limits the time during which an action can be brought by the IRS for a tax audit and the time for IRS tax collection activities. Generally, there is a 3-year statute of limitations for the IRS auditing a tax return and a 10-year statute of limitations for the IRS collecting tax. For assessments of tax or levy made after November 5, 1990, the IRS cannot either collect or levy any tax 10 years after the date of assessment of tax or levy. HOWEVER, If the tax return was filed with the intent to commit fraud then the statute of limitations can be extended to forever. There is a fine line between fraud and negligence and this only applies to tax fraud. The IRS must prove fraud in these types of cases and typically will only do this if a lot of money is involved or it is a high profile tax case.You should be aware that the states may be very different. California, for example, has NO statute of limitations on the collection of back taxes.