The IRS is always hard at work. Whether it's processing tax returns, issuing refunds or conducting audits, the Internal Revenue Service is never far away. It's best to avoid ruffling the agency's feathers by not paying your taxes.
Common ways to upset the IRS include not paying taxes when due, not paying taxes at all, not filing a return when you should, paying less tax than you owe and illegally manipulating your income to reduce tax liability.
It's against the law to lie to the IRS on a tax return. Taxpayers who attempt to cheat the IRS are held accountable for their actions, even if their actions are unintentional.
Lawbreakers can be subject to a variety of fines and penalties that may include prison time.
When dealing with the IRS, honesty is always the best policy. If you think you can cheat the IRS, remember that the IRS took down the notorious Chicago gangster Al Capone for tax evasion, even though Elliot Ness and the FBI get all the credit.
Regardless of the reason, many individuals find themselves in trouble with the IRS when presented with a staggering tax bill they can't pay. That's when tax resolution services can be a big help.
Why Would I Need Tax Resolution Services?
You might hear from the IRS for a variety of reasons. Most of the time, it will be about something that shows up on their database and requires clarification. Here are some common examples:
• Complicated returns are more likely to trigger an audit because they provide more opportunities to cheat. The IRS will check to see if you're reporting the correct amount of income and claiming only the deductions you're entitled to.
• Inconsistent returns are a red flag for the IRS. If they think you might be under-reporting your income, they may decide to take a closer look.
• Skipped returns may also attract the attention of the IRS.
The agency might contact you to schedule a meeting without telling you the reason. You might receive an official notice that contains the particulars of the bad news. Although a notice from the IRS can feel threatening, it's not the end of the world. Audits do not imply any wrongdoing on your part.
Tax resolution is a process by which individuals work with the IRS instead of against it. A qualified IRS tax lawyer working on your behalf can meet with an IRS agent to find a solution that works for everyone involved.
Your lawyer can also devise an audit defense on your behalf and ensure that the audit results are fair and accurate. The IRS is not infallible. It does make mistakes from time to time. If that happens, you have every right to challenge it.
Tax Transcript Protest
The IRS might believe that you receive more income than you report on your tax returns. They might be including income that's not yours. For example, if someone is earning money using your social security number, you will appear to have unreported income.
If you disagree with the IRS, your lawyer can challenge the agency with a transcript protest that includes evidence in support of your claim. There's no reason to pay taxes you don't even owe.
Uncollectible Tax Debt
Tax debt is not collectible if what you owe is beyond your ability to pay. Technically, tax debt is not collectible if paying it leaves you with insufficient funds to cover the cost of living.
If you qualify for this relief, your tax liability will be designated as "currently not collectible," and the IRS will not try to collect what you owe.
An IRS lawyer can help you navigate the application process to see if you qualify. However, you'll still be subject to federal tax liens on your home and other property.
When a property with a tax lien is sold, the proceeds are used to pay your taxes. You may also be liable for interest and penalties.
If your tax debt is declared "currently not collectible," the IRS will monitor your finances periodically to verify that you are still eligible for this relief.
According to the IRS, owing a tax is different than having a filing requirement. If your taxable annual income is below a certain amount, you are not required to file a return. However, individuals with earnings that exceed those limits are required to file.
In most cases, the IRS already knows how much you earned last year. They receive notifications from everyone who pays you money. The IRS gets copies of W-2 and 1099 forms that list your earnings during a given tax year.
The IRS would prefer that all individuals file tax returns annually whether they owe money or not. The agency has millions of dollars worth of unclaimed tax refunds. If you don't owe money but file a return anyway, you might even receive one.
Back Tax Payments
If you can pay your back taxes but need more time, the IRS might offer you a structured settlement plan that allows you to make affordable payments over time.
Cutting a Deal With the IRS
The IRS may agree to cut you a deal, so to speak, on the total amount you owe if you qualify for the Offer in Compromise Program. This can be tricky territory to navigate for the average taxpayer. However, an experienced tax law attorney can walk you through the process while providing needed support.
Payroll Tax Recovery
Businesses are compelled by law to submit payroll taxes on the wages of their employees. If you don't pay the tax, the IRS can penalize you through the Trust Fund Recovery Penalty. You may need an experienced IRS lawyer to help you sort it out.
Resolution of Tax Liens
Liens are claims placed against property that are used to secure unpaid taxes. Liens can be placed on homes, autos, boats and other valuables. If a lien is placed on your state-of-the-art farming equipment and you fail to pay taxes, the IRS can confiscate that equipment.
Garnishment of Wages
The IRS can deduct money from your wages if you are being uncooperative about paying what you owe. If the garnishment amount is high, you may not be left with enough money to cover your cost of living.
The tax resolution process can help you avoid garnishment until your attorney negotiates an affordable payment amount.
What If You Don't Pay the IRS?
The IRS is most likely to charge interest and impose penalties when taxes are paid arbitrarily or not at all. If you're represented by an experienced tax lawyer, the agency may agree to waive the penalties under their penalty abatement policy if you qualify.
What Is the IRS Fresh Start Program?
To better assist taxpayers, the IRS implemented several programs offering tax debt relief. The Fresh Start program was launched in 2011 and offers three new options. Your lawyer can explain the details:
• Tax Liens: Under Fresh Start, the IRS increased the dollar amount required for liens and made it easier to remove liens after taxes are paid. If a taxpayer agrees to a direct deposit payment agreement, liens can be withdrawn.
• Installment payment agreements: Fresh Start made it easier for those with back taxes of under $50,000 to participate in installment payment plans. Payment terms were increased from five years to six.
• Offer in Compromise: Under this program, you can settle your tax debt by paying less than you owe. This option is only available after other tax relief measures have been exhausted. Taxpayers with incomes under $100,000 and tax liability under $50,000 are eligible to apply.
Benefits of IRS Tax Resolution
Despite its reputation as a mafia enforcer, the IRS is quite reasonable and willing to work with you to get your tax debt out of the way.
Nevertheless, the navigation and negotiation processes involved in tax resolution can be confusing if you're not a tax law expert. It's always best to speak with a real expert first.
Under the IRS Taxpayer Bill of Rights, you have the following entitlements:
• Challenge the IRS and be heard
• Remain informed about your case
• Pay only the tax you owe
• Receive first-class service
• Appeal any IRS decision
• Have your tax debt settled
• Experience just and equitable taxation
• Enjoy privacy and confidentiality
• Retain legal counsel
Benefits of Legal Representation
If you have been notified of an impending audit, a federal tax attorney can prepare an audit defense after reviewing your financial documents. An attorney can also negotiate a fair tax debt settlement that satisfies all parties.
Many taxpayers prefer to avoid dealing directly with the IRS. In that case, a tax debt attorney can represent you and act as an intermediary.
Helbing Consumer Law offers free consultations. If you need help with federal tax debt, we will review your situation and explain your options.