Common Causes of Tax Problems
Many individuals and businesses start with unfiling one or two years of returns, which can snowball into five, six years, or even a decade of unfiled returns. Some ignore IRS notices until the situation escalates to levies, garnishments, and account liens. Others may file regularly but struggle to pay their liability each year, especially when dealing with estimated tax payments that compound over time.
Risks and Penalties
Failure to file is considered a criminal offense, making it crucial to file returns even when unable to pay the full liability. This approach helps avoid the failure-to-file penalty, though failure-to-pay penalties may still apply. The key is to become current with taxes while working toward a resolution for back taxes.
Government Enforcement Actions
The IRS and state tax authorities initially send notices requesting tax return filing. If taxpayers remain non-compliant, authorities will file estimated returns, typically higher than actual liability, to enable enforcement actions. These estimates can be challenged through audit reconsideration, allowing taxpayers to submit accurate returns.
Resolution Steps and Options
The first crucial step is achieving current compliance and consulting a tax specialist who can review transcripts and assess liability accuracy. Based on financial circumstances, resolution options may include offer in compromise settlements, payment plans, or hardship status. Success stories include cases where $800,000 debts were settled for $25,000, demonstrating that viable solutions exist for various situations.
Role of Tax Professionals
Tax attorneys play vital roles in preventing serious consequences like wage garnishments and managing audits. They can:
- Prepare accurate returns using wage transcripts and bank statements
- Challenge IRS estimates
- Negotiate with revenue officers
- Handle audit reconsideration
- Establish payment plans or settlements
Case Study
In a recent case, a client who hadn’t filed returns for over a decade faced $800,000 in estimated tax assessments. Through proper representation and accurate return filing, not only was the liability eliminated, but the client received $50,000-60,000 in refunds due to proper accounting of withholdings and business expenses.
Professional Assistance
For tax controversy issues, including unfiled returns, tax liabilities, audits, revenue officer cases, or payroll tax problems, specialized tax firms with in-house accountants and bookkeepers can help achieve compliance and qualify for appropriate resolutions.
