Tax Problems – A Quick Guide

There are many reasons why tax problems happen. Below is the anatomy of a tax problem, including the most common causes, effects and solutions for back taxes.

Tax Problems Caused By Life Events

Various persona situations give rise to a tax problem. Among the most common causes of back taxes are:

Divorce – All the emotional and financial resources are spent on ending the marriage. Tax records may be lost and tax money may be diverted to legal fees and maintenance of separate households.

Illness – The taxpayer or a family member is stricken with an illness, putting the taxes on the back burner.

Financial Hardships – A job loss or an economic decline causes the taxpayer to fall behind on their tax obligations.

Tax Audits  Taxpayer misses an audit, or can’t produce records. The IRS auditor is overly aggressive, or taxpayer does not have competent tax representation.

Business Decline – A business owner falls behind on taxes because customers are not buying as much, or stopped paying. This is very common with payroll taxes.

Addiction – It may start as a nuisance, but as the addiction progresses, financial responsibilities take a back seat or get ignored altogether.

Reasons for Back Taxes

The following are the major causes of a tax bill that is now out of control:

Failure to file tax returns – The taxpayer misses one year of filing with full intent of catching up.  By the time the IRS catches up, you may be behind for many years.

IRS presenting you with an inflated tax bill – The IRS uses available information to file your tax return for you, without the benefit of any deductions.  A taxpayer fails to show up for an audit.

Tax audit went bad – Taxpayer misses an audit, or can’t produce records. The IRS auditor is overly aggressive, or taxpayer does not have competent tax representation.

Penalties are out of control – Due to the rapid accrual of unreasonable tax penalties, a manageable tax bill quickly escalates out of control.

Financial Hardship– Job loss, business failure, and unforeseen financial burdens will eventually cause tax problems.

IRS Enforcement Tactics

Once the tax debt is assessed, the IRS has some very destructive tools to involuntarily collect the back taxes:

Tax Liens – Recorded with one or several county recorders, a lien publicly discloses that you owe back taxes, making in more difficult to get credit or even employment.

Wage Garnishments – Once a garnishment is filed, the employer is required to collect and send a percentage of each paycheck to the levying agency.

Levies – The government sends a notice of levy, thus seizing all the funds in the bank or investment account.  The IRS can also seize real estate or other assets to satisfy back taxes.

IRS Harassment – IRS agents must comply with procedural safeguards provided by law.

Personal Liability – Corporate officers or owners may be held personally liable for unpaid payroll taxes.

Help is Available

Taxpayers have rights in dealing with the IRS and State Agencies.  The following are some of the best programs for reducing or managing back taxes:

Offer in Compromise – IRS programs allow qualified taxpayers to settle tax debts for a fraction of the balance.

Release of Liens – Under certain circumstances, tax liens can be release or subordinated.

Tax Bankruptcy – Certain taxes may be forgiven in bankruptcy, provided certain conditions are met.

Payment Plans – The IRS may allow you to repay your tax debt over time.

Penalty Relief – Some penalties may be excusable for reasonable cause.

Audit Reconsideration – You can petition the IRS to reevaluate the audit findings by presenting new evidence.

File Accurate Tax Returns – Filing accurate tax returns may reduce your tax burden or even qualify you for a refund.

Tax Problems

TaxHelpers Help With Back Taxes

We help many taxpayers get back in to the tax system. Some are only behind a year or two, others need to file way back into the 1980’s. Regardless of complexity, tax experts promptly prepare accurate tax returns to manage the risk of criminal prosecution and enforced collection by the IRS and the State. We help you through every step of the process. The Attorney-Client Privilege gives you an additional level of security, and legal protection. Please call for your tax consultation with a Tax Attorney.

We have offices conveniently located in San Mateo, San Jose, San Francisco, Oakland, Walnut Creek, and Sacramento.

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