Taxation-related issues may seem trivial on face value, but they can snowball into serious problems if left unchecked and not resolved. Even a first time instance or an unintentional mistake is good enough to get the IRS involved, putting your bank accounts, pay-checks, and even liquid assets under the threat of being investigated and/or seized. That is why you must always be in a position to make informed decisions. While professional consultation with a lawyer is always recommended for IRS problems, it still helps to learn and understand IRS matters for yourself. In this blog, we take a closer look at a few common IRS related problems that can lead to undesirable consequences if left unattended. We will also discuss what taxpayers should know about IRS problem resolution by citing two examples of IRS problems and their solutions.
The 4 Most Common IRS Problems
1. Unfiled Tax Returns
“Taxpayers are required by law to file income tax returns every year in which a filing requirement exists. The IRS may impose a wide range of civil and criminal sanctions on persons who fail to file returns” (FS-2008-12, January 2008). If unfiled or pending tax returns aren’t filed, they will be recorded and filed by the IRS, which will most likely not consider any deductions, expenses, dependents, or even the actual filing status, among other tax-saving avenues. Procrastinating when it comes to filing tax returns can lead to serious problems with the IRS.
2. IRS Tax Investigation
Any tax-related problem will eventually lead to a tax investigation by the IRS, and having copies of all your tax files gives you a great starting point to get a resolution. The risk of an IRS investigation increases a lot if you personally request your tax file, as you are automatically red flagged. Some of the issues that can lead to an IRS investigation include failing to report your income to the IRS, claiming deductions that exceed the qualified limit, mathematical discrepancies in tax returns, and claiming a dependent that has already been claimed by someone else.
3. IRS Appeals
If you are not satisfied with the IRS’ resolution of your tax issue, you can appeal to the Office of Appeals, an independent, unbiased third-party organization that makes sure that both parties are un-partially heard and helps you reach a mutually agreed solution without involving the tax court. Two common kinds of IRS tax appeals are “Request for a Collection Due Process,” which is generally made when the IRS issues a final notice of intent to levy, and “Rejected Offer in Compromise,” which is considered to be the final opportunity within the administrative process to negotiate the submitted Offer in Compromise. Several other appeals exist apart from these that can help taxpayers solve their tax problems.
4. Payroll Tax Problems
Every employer is required to withhold a certain amount of every employee’s salary to cover their federal income tax liabilities, social security, and Medicare taxes, all commonly known as “trust taxes.” If a business has employment taxes that are overdue, the IRS will seize its business assets to recover the dues. This may be applicable to both operating and non-functioning businesses.
These are four common IRS tax problems. Taxpayers should be aware that IRS programs and tax relief options exist to help them navigate out of their tax problems. If you are facing any of the aforementioned IRS related issues or any other IRS tax issue, it is highly recommended that you seek the services of a team of professional tax attorneys. They can provide insight into your case and help provide desirable resolution for IRS tax problems. Let’s discuss examples of two things that taxpayers should know in this regard.
Example 1. IRS Tax Liens: The IRS Fresh Start Program for a Massive IRS Problem
The IRS has recently made changes to its tax relief program (the new Fresh Start Program) that make it easier for taxpayers, including small business taxpayers, to settle their IRS debt for a reduced amount and avoid IRS tax liens. Under the IRS New Fresh Start Program, taxpayers would be able to fix their tax problems quickly and for less money; however, it is advisable not to wait for the right time as these programs are constantly changing. If you are facing an IRS debt problem and have received a notice for an IRS tax lien, this section will walk you through some of the features of the IRS Fresh Start Program that will help you take the right foot forward.
What is a Tax Lien?
A federal tax lien is the government’s legal claim against a delinquent taxpayer’s property in order to secure the payment of taxes. A tax lien can be imposed on the property, including real estate, personal property, and financial assets. Before the introduction of the Fresh Start Program, a tax lien could be filed even if the tax owed was less than $10,000. Now, the minimum owed amount should be $10,000 to qualify for the tax lien, but with some exceptions in cases wherein the IRS may still file a lien, irrespective of the amount owed.
How does the Fresh Start Program Help?
Under the Fresh Start Program, if a taxpayer meets certain specified requirements by the IRS and pays off their tax debts, they can request the IRS withdraw a filed notice of Federal Tax Lien by filing Form 12277 (Application of Withdrawal). Taxpayers may also request a lien notice withdrawal if they agree to pay off their tax debts through a Direct Debit installment agreement. In this case too, taxpayers will have to request the withdrawal in writing by filling Form 12277. In case a taxpayer fails to fulfill Direct Debit installment Agreement, the IRS may again file a fresh Notice of Federal Tax Lien for collection purposes.
Seek Professional Assistance
IRS problems, such as a tax lien, are legal problems. Therefore, it is advisable not to trust your IRS problems to some of the State Tax resolution companies. The Dallas local Law office of Nick Nemeth has handled thousands of IRS cases. Our experienced tax lien attorneys have an in-depth understanding of how the IRS operates. Whenever you contact us to resolve your IRS problems, your first visit to us is completely free and is kept confidential. No matter whether you have a tax lien, bank levy, or any other IRS penalty, for any IRS help with IRS tax problems, feel free to call our office.
Example 2. IRS Tax Audits and the Right to Finality
Taxpayers interacting with the IRS about their tax issues, especially those who are being audited by the IRS, have the right to finality. The government makes sure that taxpayers know about their rights so that they can negotiate about IRS problems accordingly and avoid any misunderstandings. In this section, let’s look at what taxpayers facing IRS problems must know about the Right to Finality.
The Taxpayer Bill of Rights
The Taxpayer Bill of Rights, or TBOR, is a document consisting of ten fundamental rights every taxpayer should know when dealing with IRS tax issues. The Internal Revenue Service continues to highlight these rights publicly to taxpayers so that they are aware of them while dealing with their personal IRS issues. The government also reminds its employees regularly about these rights so that they understand and apply them during all encounters with taxpayers.
What Taxpayers Should Expect?
- The government has three years from the date taxpayers file their returns to assess any additional tax for that particular tax year, although there are some exceptions to this rule. For instance, if taxpayers fail to file a return or file a false return, the IRS can assess their tax for that tax year whenever it wants.
- The IRS has 10 years from the time it assessed taxes to collect unpaid taxes from taxpayers. This period is non-extendable unless taxpayers agree to pay their tax debts in installments. The government can, however, suspend these ten years and reactivate them later if it cannot collect taxes due to situations such as bankruptcy.
- If taxpayers believe they have overpaid their taxes, they can file a refund claim within three years from the date of filing the original return or two years from the date they paid their taxes.
- If the IRS sends a statutory notice of deficiency, it must include the deadline for when taxpayers can file a petition with the court to challenge the proposed amount. Taxpayers must file their petition within 90 days after receiving the statutory notice.
Right to Finality for Taxpayers in the Process of an Audit
Taxpayers have the right to know:
- The maximum amount of time they have to challenge the government’s position.
- The maximum amount of time the government has to collect a tax debt or audit a tax year.
- When the IRS has completed an audit.
Wrap Up
The IRS is committed to protecting taxpayers’ rights and does not tolerate discrimination based on color, age, disability, reprisal, race, national origin, sex, English proficiency, religion, or sexual orientation. These are only two examples of what taxpayers need to know when navigating IRS problems. There are many other reforms, policies, and solutions in place for taxpayers. If taxpayers in Dallas feel that they are not able to solve their tax problems with the IRS, they can always connect with tax attorneys at the Law Offices of Nick Nemeth for experienced professional help. To discuss your IRS problems and learn how we can help, call (972) 426-2553 or fill out our contact form for a free consultation. We have a team of highly knowledgeable and experienced IRS tax attorneys in Dallas who can help with IRS tax problems.
