Help With Common IRS Problems

Printed in Coatings Professional Journal

It’s tax time. There are numerous issues you’ll be able to run into with the IRS. This text is a generalized overview of a few of these complicated points:

• IRS Penalties

• Unfiled Tax Returns

• IRS Liens

• IRS Audits

• Payroll Tax Issues

• IRS Levies

• Wage Garnishments

• IRS Seizures

When coping with the IRS, it will possibly look like they’ve all the facility. That’s not at all times true. As a small enterprise owner–and a taxpayer–it is important that you understand your choices and your rights.

IRS Penalties

The IRS penalizes hundreds of thousands of taxpayers every year. In reality, they’ve so many penalties that it may be arduous to know which penalty they’re hitting you with.

The most typical penalties are Failure to File and Failure to Pay. Each of those penalties can considerably enhance the quantity you owe the IRS in a really brief time period.

To make issues worse, the IRS fees curiosity on penalties. Many taxpayers typically discover out about IRS issues a few years after they’ve occurred. Because of this, the quantity owed the IRS is considerably higher resulting from penalties and the accrued curiosity on these penalties. Some IRS penalties could be as excessive as 75% to 100% of the unique taxes owed. Typically taxpayers can afford to pay the taxes owed, however the further penalties make it inconceivable to repay all the stability.

The unique aim of the IRS imposing penalties was to punish taxpayers with a purpose to hold them in line. Sadly, the penalties have became further sources of earnings for the IRS. So they’re comfortable so as to add no matter penalties they will and to pile curiosity on prime of these penalties. Your loss is their acquire.

It is very important know that underneath sure circumstances the IRS does abate, or forgive, penalties. Subsequently earlier than you pay the IRS any penalty quantities, you might need to take into account requesting that the IRS abate your penalties.

Unfiled Tax Returns

Many taxpayers fail to file required tax returns for a wide range of causes. What you will need to perceive is that failure to file tax returns could also be construed as a legal act by the IRS–a legal act punishable by as much as one 12 months in jail for every year not filed. For sure, its one factor to owe the IRS cash however one other factor to doubtlessly lose your freedom for failure to file a tax return.

The IRS could file “SFR” (Substitute For Return) Tax Returns in your behalf. That is the IRS’s model of an unfiled tax return. As a result of SFR Tax Returns are filed in the most effective curiosity of the federal government, the one deductions you’ll see are normal deductions and one private exemption. You’ll not get credit score for deductions to which you’ll be entitled, resembling exemptions for a partner or kids, curiosity on your house mortgage and property taxes, price of any inventory or actual property gross sales, enterprise bills, and so on.

Do not forget that no matter what you’ve heard, you’ve the best to file your unique tax return, regardless of how late it’s filed.

IRS Liens

The IRS could make your life depressing by submitting Federal Tax Liens on your small business or property. Federal Tax Liens are public information indicating that you simply owe the IRS varied taxes. They’re filed with the County Clerk within the county from which you or your small business operates.

As a result of they’re public information, they are going to present up in your credit score report. This typically makes it troublesome to acquire financing on an vehicle or a house. Federal Tax Liens may also tie up your private property, that means that you simply can not promote or switch that property with out a clear title.

Typically taxpayers discover themselves in a Catch-22 during which they’ve property that they wish to borrow in opposition to, however due to the Federal Tax Lien, they can not get a mortgage. Ought to a Federal Tax Lien be filed in opposition to you, a CPA may also help get it lifted.

IRS Audits

The IRS conducts a number of varieties of audits. They’ll audit you by mail, of their places of work, in your workplace or dwelling. The situation of the audit is an effective indication of the severity.

Usually, Correspondence Audits are performed to find lacking paperwork in your tax return which have been flagged by IRS computer systems. These paperwork often embrace W-2s and 1099 earnings gadgets or curiosity expense gadgets. This sort of audit can sometimes be dealt with by way of the mail with the proper documentation.

The IRS Workplace Audit–held in IRS offices–is often performed by a Tax Examiner who will request quite a few paperwork and explanations of varied deductions. Throughout this sort of audit you might be required to supply all financial institution information for a time period in order that the IRS can examine for unreported earnings.

The IRS House or Workplace Audit–held in your house or office–should be taken very severely as these are performed by IRS Income Brokers. Income Brokers obtain extra coaching and study extra auditing methods than typical Tax Examiners.

In fact, all IRS audits ought to be taken severely as they typically result in examinations of different tax years and different tax issues not said within the unique audit letter.

Payroll Tax Issues

The IRS could be very aggressive of their assortment makes an attempt for past-due payroll taxes. The penalties assessed on delinquent payroll tax deposits or filings can dramatically enhance the entire quantity you owe in only a matter of months.

I imagine that it’s vital for enterprise homeowners to have an lawyer current in these conditions. Your solutions to the primary 5 IRS questions could decide whether or not you keep in enterprise or are liquidated by the IRS. We at all times advise purchasers to keep away from assembly with any IRS representatives relating to payroll taxes till you’ve met with an expert to debate your choices.

IRS Levies–Financial institution and Wage

An IRS Levy is an motion taken by the IRS to gather taxes. For instance, the IRS can concern a Financial institution Levy to acquire the money in your financial savings and checking accounts. Or, the IRS can levy your wages or accounts receivable. The individual, firm, or establishment that’s served with the levy should comply or face its personal IRS issues.

When the IRS levies a checking account, the levy can solely be honored on the actual day on which the financial institution receives the levy. The financial institution is required to take away no matter amount of cash is in your account on that day (as much as the quantity of the IRS Levy) and ship it to the IRS inside 21 days until in any other case notified by the IRS. This sort of levy doesn’t have an effect on any future deposits made into your checking account until the IRS points one other Financial institution Levy.

An IRS Wage Levy is totally different. Wage Levies are filed together with your employer and stay in impact till the IRS notifies the employer that the Wage Levy has been launched. Most Wage Levies take a lot cash from the taxpayer’s paycheck that the taxpayer doesn’t even find the money for remaining to satisfy fundamental wants.

Each Financial institution and Wage Levies create troublesome conditions and ought to be averted if potential.

Wage Garnishments

The IRS Wage Garnishment is a really highly effective software used to gather taxes that you simply owe by way of your employer. As soon as a Wage Garnishment is filed with an employer, the employer is required to gather a big share of every paycheck. The funds that might have in any other case been paid to the worker will then be paid to the IRS.

The Wage Garnishment stays in impact till the IRS is totally paid or till the IRS agrees to launch the garnishment. Having wages garnished can create different debt issues as a result of the quantity left over after the IRS takes its minimize is commonly small, so you will have issue with payments and different monetary obligations.

IRS Seizures

The IRS has intensive powers with regards to seizures of property. These powers enable them to grab private and enterprise property to repay excellent tax liabilities. Seizures sometimes happen when taxpayers have been avoiding the IRS.

Much like levies and garnishments, seizures are one of many IRS’s final invasive assortment instruments. They’ll seize vehicles, tv units, jewellery, computer systems, collectibles, enterprise tools, or something of worth, which could be offered with a purpose to purchase the cash the IRS desires to repay your tax money owed. If you’re going through a seizure, you’ve a significant issue.

Hopefully this tax season will start and finish with none of those IRS points coming into play. But when they do, assistance is on the market. CPAs and attorneys may also help you negotiate your rights ought to it change into needed.

The knowledge offered herein isn’t supposed as authorized, accounting, monetary or any kind of recommendation for any particular particular person or different entity. It’s best to contact an acceptable skilled for any such recommendation.