IRS TAX PROBLEMS
| Audit Notices
An IRS audit can be prompted for a variety of reasons, but typically it is triggered because of irregularities on a tax return that require the taxpayer to produce records and defend their position. Audits are also initiated by random selection. Whatever the reason for the IRS audit notice, it is an event to be taken seriously by the taxpayer. Sometimes resolving the issues identified in the IRS letter are straight forward, but more often than not, it is wise to have the skills of a tax audit specialist when responding to your IRS Audit Notice. Bank Account Levy Back Taxes IRS Interest and Penalties The assessment of penalties is a matter every taxpayer should take seriously. Penalties quickly accumulate and can often be more than the actual tax owed. Most taxpayers find out about their IRS tax problems many years after the tax situation has occurred. Consequently, the amount owed to the IRS is significantly greater due to the penalties and interest that have been assessed. Some IRS penalties can be as high as 75%-100% of the original taxes owed. Also keep in mind that the IRS does charge interest on penalties, once again increasing the amount owed to insurmountable levels for the taxpayer. Wage Garnishments Having your wages garnished is a distressing experience to say the least. It can be financially devastating! Typically the portion required to be garnished from your paycheck by your employer is a large percentage of your paycheck. To increase the stress from this IRS wage levy situation even more, the processing of the wage garnishment obviously requires your employer be informed that you have an IRS tax problem. Most taxpayers feel their financial struggles are private and personal matters. IRS Federal Tax Lien A federal tax lien attaches all property you currently own as well as property you may acquire in the future. This tax lien will remain in place until the tax debt is paid in full or the lien is effectively discharged (statute for collection expires or tax liability is abated). Federal tax liens do have a negative impact on your credit history. Federal tax liens make borrowing from lenders an extremely difficult process when you try to secure financing in the future for vehicle or home loans. Federal tax liens also do not allow you to realize the full benefits of those assets that have the lien attached. Once a tax lien is filed against your property, you will have to satisfy the delinquent tax debt before you can even sell or transfer your own property! IRS Tax Levy The IRS can seize and sell your vehicles, your boat, real estate including your primary residence/home, any vacant land or rental property you may hold. The IRS can levy not only your bank accounts and your wages, but they can even levy your social security benefits, your retirement accounts, and the cash value of your life insurance policy. Their levy powers of authority are as far reaching as a delinquent taxpayer can imagine. If you have not paid your delinquent tax liabilities, the IRS can and will take drastic actions such as those outlined above. IRS Notice of Intent to Levy Payroll Tax Problem The term “payroll taxes” refers to the Social Security and Medicare taxes that are designed to provide benefits to retired and/or disabled employees and the dependents of both. Medicare taxes are designed to provide medical benefits for certain individuals when they reach the age of 65 years old. Employers are required to deduct and without a predetermined percentage of each employee's wage and then remit that amount directly to the IRS. These deducte d employee taxes are held “ in trust ” by the employer for the federal government. Therefore, the IRS rightfully conside rs these withheld employment taxes to be the government's money. These funds are not monies to be used by the business and they are not the employee's money either. This money is the property of the United States Treasury. Keeping these facts in mind, it is easy to see why the IRS is extremely strict with regard to the payment of employment taxes and the collection of outstanding employment tax liabilities. Businesses that are struggling with cash flow may mistakenly choose to not file employment tax returns until they have the funds available to pay the taxes. This is a critical error in judgment. Not only will the business have to pay the taxes, but there are also large penalties for not filing the return on time, not making federal tax deposits, and not paying the tax and the interest. Even more daunting is the reality that the individual who has the authority to sign checks can be held personally liable for a portion or even all of the taxes not paid to the IRS. Unfiled Tax Returns The IRS does not intend to simply let a taxpayer go “unattended and not filed” so it is common for the IRS to file a version of your tax return “for you”. This is called a Substitute for Return, or “SFR.” This return will be their version of your unfiled tax return for the year(s) at hand. Since the IRS is completing this filing on behalf of a problematic taxpayer, these returns are usually filed keeping the best interest of the government in mind. This special focus clearly relates to the tax deductions area where only the standard deduction and one personal exemption will be applied on the taxpayer's behalf. Deduction credit will not be given for any other expenses that you may be entitled to for the tax year. Taxpayers do have the right to file the original tax return, regardless of how delinquent. However, once the SFR is completed and the tax assessed by the IRS, it can be difficult to correct the error. If you have not filed your personal or business tax returns, you have a very serious problem that needs to be handled immediately. The first step is to prepare and file the missing returns. The largest penalty the IRS imposes is for not filing tax returns and the penalty can be as high as 25% of what you owe. If you voluntarily file returns with an unpaid balance, the IRS has 10 years in which to collect. There is no time limitation on collection for returns prepared under the Substitute for Return (SFR) program. The taxpayer will owe the tax forever. IRS Wage Levy |