IRS problems are difficult to resolve because you can’t
get accurate information. You may not feel comfortable calling
the IRS for the answer. To help you better understand your situation
we’ve outlined some of the problem areas we frequently deal
with. After you’ve reviewed this information be sure to
see Our Solutions to ending IRS Nightmare.
Payroll Tax Problems
The IRS is very aggressive in their collection attempts for past
due payroll taxes. The penalties assessed on delinquent payroll
tax deposits or filings can dramatically increase the total amount
owed in a matter of months. We believe that it is critical to
have a CPA, Attorney, or Enrolled Agent represent taxpayers in
these types of situations. How you answer the first five questions
asked by the IRS may determine whether you stay in business or
are liquidated by the IRS. You should avoid meeting with any IRS
representatives regarding payroll taxes until you have met with
a professional to discuss your options.
IRS Liens
The IRS can make your life miserable by filing federal tax liens.
Federal Tax Liens are public records that indicate you owe the
IRS various taxes. They are filed with the County Clerk in the
county from which you or your business operates. Because they
are public records they will show up on your credit report. This
often makes it difficult for a taxpayer to obtain any financing
on an automobile or a home. Federal Tax Liens also can tie up
your personal property and real estate. Once a Federal Tax Lien
is filed against your property you cannot sell or transfer the
property without a clear title. Often taxpayers find themselves
in a Catch-22 where they have property that they would like to
borrow against, but because of the Federal Tax Lien, they cannot
get a loan.
IRS Levies
An IRS levy is the actual action taken by the IRS to collect
taxes. For example, the IRS can issue a bank levy to obtain your
cash in savings and checking accounts. Or the IRS can levy your
wages or accounts receivable. The person, company, or institution
that is served the levy must comply or face their own IRS problems.
The additional paperwork this person, company or institution is
faced with to comply with the levy usually causes the taxpayer's
relationship to suffer with the person being levied. Levies should
be avoided at all costs and are usually the result of poor or
no communication with the IRS.
When the IRS levies a bank account, the levy is only for the
particular day the levy is received by the bank. The bank is required
to remove whatever amount is available in your account that day
(up to the amount of the IRS levy) and send it to the IRS in 21
days unless notified otherwise by the IRS. This type of levy does
not affect any future deposits made into your bank account unless
the IRS issues another Bank Account Levy.
An IRS Wage Levy is different. Wage levies are filed with your
employer and remain in effect until the IRS notifies the employer
that the wage levy has been released. Most wage levies take so
much money from the taxpayer's paycheck that the taxpayer doesn't
have enough money to live on.
IRS Audits
The IRS can audit you by mail, in their offices, or in your office
or home. The location of your audit is a good indication of the
severity of the audit. Typically, correspondence audits are for
missing documents in your tax return that IRS computers have attempted
to find. These usually include W-2's and 1099 income items or
interest expense items. This type of audit can be handled through
the mail with the correct documentation. The IRS office audit
is usually with a Tax Examiner who will request numerous documents
and explanations of various deductions. This type of audit may
also require you to produce all bank records for a period of time
so that the IRS can check for unreported income. The IRS audit
schedule for your home or office should be taken more seriously
due to the fact that the IRS Auditor is a Revenue Agent. Revenue
Agents receive more training and auditing techniques than a typical
Tax Examiner. All IRS audits should be taken seriously because
they often lead to other tax years and other tax deductions not
originally stated in the audit letter.
IRS Seizures
The IRS has extension powers when it comes to Seizure of Assets.
These powers allow them to seize personal and business assets
to pay off outstanding tax liabilities. This occurs when taxpayers
have been avoiding the IRS. The IRS attempts to collect amounts
owed with a seizure as the ultimate act of their collection efforts.
IRS Wage Garnishment
The IRS wage garnishment is a very powerful tool used to collect
taxes owed through your employer. Once a wage garnishment is filed
with an employer, the employer is required to collect a large
percentage of each paycheck. The paycheck that would have otherwise
been paid to the employee instead will now be paid to the IRS.
The wage garnishment stays in effect until the IRS is fully paid
or until the IRS agrees to release the garnishment.
Unfiled Tax Returns
Many taxpayers fail to file required tax returns for many reasons.
The taxpayer must be aware that failure to file tax returns may
be construed as a criminal act by the IRS. This type of criminal
act is punishable by one year in jail for each year not filed.
Needless to say, it's one thing to owe the IRS money but another
thing to potentially lose your freedom for failure to file a tax
return. The IRS may file "SFR" (Substitute For Return)
Tax Returns for you. This is the IRS's version of an unfiled tax
return. Because SFR returns are filed in the best interest of
the government, the only deductions you'll see are standard deductions
and one personal exemption. You will not get credit for deductions
which you may be entitled to such as exemptions for spouses, children,
interest and taxes on your home, cost of any stock or real estate
sales, and business expenses, etc. Regardless of what you have
heard, you have the right to file your original tax return, no
matter how late it's filed.
IRS Penalties
The IRS penalizes millions of taxpayers each year. They have
so many penalties that it's hard to understand which penalty they
are hitting you with.
The most common penalties are: Failure to File and Failure to
Pay. Both of these penalties can substantially increase the amount
you owe the IRS in a very short period of time. To make matters
worse the IRS charges you interest on penalties.
Many taxpayers often find out about IRS problems many years after
they have occurred. This causes the amount owed to the IRS to
be substantially greater due to penalties and interest.
Some IRS penalties can be as high as 75%-100% of the original
taxes owed. Often taxpayers can afford to pay the taxes owed;
however the extra penalties make it impossible to pay off the
entire balance.
The original goal of IRS imposing penalties was to punish taxpayers
to keep them in line. Unfortunately they have turned into additional
sources of income for the IRS. The IRS does abate penalties. Therefore
before you pay the IRS any penalty amounts, you may want to consider
requesting the IRS to abate your penalties.
