Millions of individuals and small businesses experience IRS tax problems each year. They range from filing incomplete or false tax returns to not paying the necessary taxes at all. Experts estimate that one in five taxpayers needs help with outstanding IRS tax problems.
If the IRS calculates that you owe back taxes, they will use various tools to get the taxpayer to settle that debt. Here is an alphabetical list of each IRS tax problem and the tools used by the IRS to deal with them. Between three and five of these categories will usually broadly define the typical taxpayer back tax problem.
Here’s an alphabetical list of the most common tax debt problems. Please go through these concise descriptions to see which categories apply to you. Then research your categories further by clicking through to more specific articles in the BLOG CATEGORIES list over in the column on your right to better understand where you stand with your tax problem resolution.
An Enrolled Agent, Tax Attorney or CPA that specializes in tax resolution work, can help taxpayers solve their tax problem. Long Island Tax Resolution Services specialty is helping with New York State and IRS tax problems in Long Island.
The IRS uses letters to communicate with taxpayers about audits, and these letters always include a deadline. You have only until the stated date to prepare an audit response, with all necessary documentation. However, it’s not necessary that an error has occurred, for audits can also result in a refund to the taxpayer or even a no due tax determination.
Unpaid taxes are probably the most common of back tax problems. The IRS usually takes actions on defaulting taxpayers, whether it is because of partial or complete non-payment of taxes. Based on your unique financial status, it is critical to understand what alternatives are available to you, and only an tax specialist with experience in the field can truly help with a back tax problem.
Death and Tax Debt
Tax debt problems do not necessarily die with the debtor. The debtor’s estate becomes responsible for the deceased’s tax debt. It then falls to the estate executor to resolve the tax debt problem. Tax debt problems can also become the responsibility of a surviving spouse. The IRS can hold descendants responsible who have already received an inheritance (even if spent) if there is tax debt still outstanding against an estate.
While a tax lien is simply a claim on property, a tax levy is a legal seizure of property by the IRS to satisfy a tax debt. Examples of seizable assets are: cars, boats, houses, wages, retirement accounts, bank accounts and many others. It is important to act quickly to stop or release a levy, since it can completely disrupt your life. For ideal protection, you should seek help from a tax resolution expert who can assess your finances and help with suitable strategies for tax debt problems.
A tax lien is the first collection action used by the IRS for settlement of tax debt. It is a legal claim against property and protects the government’s interest versus other creditors. Upon receiving a notice of tax lien, it is crucial that you begin working immediately with a certified expert trained in IRS methods and procedures to initiate defensive action. Additional steps should be taken to stop future actions of this nature.
IRS Notices are basically information sent to taxpayers regarding tax problems with their account. Most notices are about back taxes and will include an early assessment of debts including penalties and interest. Threatened actions become increasingly serious the further down the line you get in the sequence of notices you get.
Recently, the IRS hired over 800 new employees to exclusively deal with international enforcement. They include agents, lawyers, economists and other experts. This is an attempt to ensure that U.S. taxpayers cannot evade taxes simply by moving income and assetts offshore.
Payroll and Sales Tax
Both the IRS and the States have become increasingly attentive to collecting tax debt owed in the areas of payroll and sales tax. Assessed penalties on these taxes as well as delinquent filings can dramatically increase the total amount owed. It is critical to have experts experienced with small business tax problems represent you. An interview done in time can make or break your business. It is crucial to consult a tax resolution expert to explore your alternatives.
Penalties and Interest
Back taxes accumulate interest over time. In addition, there are penalties like the “failure to file” penalty and “failure to pay” penalty. The IRS has more than 100 penalty categories for individuals and small businesses. Working with a certified specialist who is expert in the areas of penalties and interest can often get them decreased or even removed.
The large number of retirement plans which are available today bring with them a complex set of rules and terms. Examples are withdrawal amounts, age limits, transfer rules, reclassifications and many more. These cause many types of tax problems with the IRS. Mistaken or incorrect reporting of retirement plan transfers and withdrawals cause significant problems. Seeking the advice of a tax resolution expert specializing in this area will help.
Small business owners should educate themselves regarding potential tax problems in additional areas than those in payroll and sales tax already outlined above. For example it is critical to properly classify workers as either employees or independent contractors. Misclassification results in income misrepresentation and carries stiff penalties. Preventative steps can be taken by consulting with a tax resolution expert familiar with the specific needs of small businesses to ensure that no problems occur in the future.
The current recession has negatively impacted the financial condition of most states. To combat this, states have become much more vigilant in collecting tax debt. Both high income and small business taxpayers are especially vulnerable. Each state has its own set of procedures and rules for dealing with tax debt, so it is important to work with experts specializing in tax relief in your particular state.
Neglecting to file tax returns is a criminal act. Typically, the IRS will file a substitute tax return on your behalf. The only deductions you will receive are personal exemption and standard deduction. Deductions for your spouse, children, mortgage interest, real estate taxes, capital gains, business expenses and others will not be taken into consideration. It is important to file your tax returns, no matter how late they are, in order to ensure you get all the tax deductions coming to you. More importantly, a tax resolution process cannot even begin until all overdue tax returns are filed with the IRS.
Wage garnishment notices mean that wages will be deducted from your pay check to settle outstanding tax debts. Your employer is notified of your back tax problem and is then required to send to the IRS a portion of your wages to offset the debt. If you don’t respond, your wages will continue to be garnished until the debt is completely satisfied. Our team will work with the IRS to negotiate terms and get you full or partial release of the wage garnishment, thereby giving you tax relief.