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Tax Problems – A Quick Guide

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

Tax Problems Caused By Life Events

Various personal 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 taxpayers 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 the taxpayer does not have competent tax representation.

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

Addiction – It may start as a nuisance, but financial responsibilities take a back seat as the addiction progresses 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 the full intent of catching up.  When 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 the taxpayer does not have competent tax representation.

Penalties are out of control – A manageable tax bill quickly escalates out of control due to the rapid accrual of unreasonable tax penalties.

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 collect the back taxes involuntarily:

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

Wage Garnishments – The employer must collect and send a percentage of each paycheck to the levying agency once a garnishment is filed.

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 released or subordinated.

Tax Bankruptcy – Certain taxes may be forgiven in bankruptcy, provided 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 into the tax system. Some are only behind a year or two; others must file into the 1980s. 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 conveniently have offices in San Mateo, San Jose, San Francisco, Oakland, Walnut Creek, and Sacramento.

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