Tax Problems

Common IRS Tax Problems People Face

Unfiled Tax Returns

Do you have tax returns you never filed? The penalties for unfiled returns are much worse than for unpaid taxes. Even if you can’t pay, you should still file your return. The time limit for audits and taxes owed doesn’t start until you file your return or the IRS files for you. The IRS is more lenient if you come forward on your own. If they have to contact you first, you might face even more penalties. Fortunately, if you lack the necessary documents or money, a tax specialist can help you file your back taxes.

Federal Tax lien

A tax lien is a legal claim on your assets. For example, if you owe on a car loan, the lender has a lien on your car. Similarly, the IRS files a Notice of Federal Tax Lien to let creditors know they have a claim on your property. This doesn’t mean the IRS is taking your property yet. Tax liens used to appear on credit reports, but since 2018, they no longer do. However, they are still public records, and creditors can find out about them by contacting the IRS. To remove a tax lien and stop further collection actions, you should contact the IRS to make payment arrangements as soon as possible.

Federal Tax levy

A Federal tax levy is when the IRS starts taking your assets. It’s one of the strictest ways the IRS collects unpaid taxes. They can take money from your bank account, cars, home, and other valuables. Usually, the IRS gives you a 20-day notice before a tax levy and offers you a chance for a hearing. If you’ve received a notice of a Federal tax levy, you need to act fast to stop the IRS from seizing your assets.

IRS wage garnishment

IRS wage garnishment is when the IRS takes part of your paycheck to cover unpaid taxes. While any creditor can garnish your wages, the IRS can take a larger portion than most. If you’re self-employed, the IRS can’t garnish your paycheck but can reach out to your clients and take the payments they owe you. It’s best to contact a tax resolution specialist before garnishment starts, but sometimes you can stop an existing garnishment.

Tax Audit Representation

You will likely face an audit at some point in your life. The risk is higher if you report zero or over $20 million in income. Self-employed people and small business owners also face audits more often. If you are being audited, a tax specialist can assist you. Handling IRS tax problems can be intimidating, costly, and overwhelming.

Recognizing Signs of IRS Tax Problems

Tax Penalties

The IRS adds penalties for not filing tax returns and not paying taxes. The amount of these penalties depends on your situation. Fortunately, you can sometimes get these penalties removed. If you set up a payment plan, the IRS often reduces the penalty for not paying the full amount on time.

IRS Letters

Receiving a letter from the IRS can be frightening, especially if you don’t understand it. The IRS sends about 75 different types of notices. Sometimes these letters tell you about taxes you owe, but they often warn about future collection actions or inform you of your right to appeal certain decisions. If you’re unsure what to do, a licensed tax professional or tax relief firm can help.

IRS Tax Resolution Strategies

Several strategies can help resolve tax problems effectively:

Installment Agreements

Paying your taxes through an installment agreement is a common way to fix your tax problem. It’s a good idea to get professional tax advice because the IRS often asks for a high monthly payment. A tax professional can help you get an installment agreement that’s more affordable and manageable for you.

Penalty abatement

Penalty abatement is a situation whereby a taxpayer can be exempted from paying some or all the penalties that as a result of his or her failure to meet his or her tax obligations. Reasons may include acts of god like floods, hurricanes, etc., health issues such as critical illness, etc. that are beyond one’s control. So to claim penalty abatement, one is expected to write a letter to the IRS with an explanation as well and any supporting documents. It is beneficial to consult with a tax resolution specialist as this will improve your chances, as well as provide guidance on how to pass through the process while saving potentially thousands of dollars in penalties.

Innocent Spouse Relief

if you’re facing IRS tax problems because of your spouse or ex-spouse’s tax mistakes, you might qualify for innocent spouse relief. This means you won’t be held responsible for their errors, like underreported income or incorrect deductions, if you didn’t know about them when you signed the tax return. To get this relief, you need to prove that you were unaware of the mistakes and that it would be unfair to hold you accountable. Applying for innocent spouse relief can help protect you from paying taxes, interest, and penalties caused by your spouses tax issues.

Offer in Compromise

An Offer in Compromise is a way to settle your tax debt for less than the full amount you owe. If you can’t pay your full tax bill or if paying it would create financial hardship, the IRS might accept a lower amount. To apply, you need to provide detailed information about your finances, including your income, expenses, and assets. If the IRS agrees, you can clear your tax debt by paying the reduced amount. Working with a tax professional can help you increase your chances of getting an Offer-In-Compromise approved.

Get Help with Your Tax Problems

It is always a nightmare having to face and or deal with tax problems from the IRS or any state. Fortunately, you are not alone in it, and there are resources available to assist you. Learn about the resources available for IRS tax problems and whether or not you receive help for free. Look for more options to get help with taxes and determine what option is going to be right for you.

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