Five Ways To Avoid IRS Tax Problems
From business people and entrepreneurs to college students, individuals from all walks of life can feel overwhelmed when confronted with IRS tax problems. However, don’t panic if you get into a bit of trouble with the government; through the help of dedicated professionals, you can efficiently deal with these problems. Here are five ways to avoid serious tax problems this season.
1. File Returns Regardless of Personal Circumstances
Individuals need to file tax returns, even if they feel they have earned no taxable income. Some people go for years without filing returns. These misguided individuals may feel that if they’ve lasted so long without facing disaster that they can continue for years to come. Regardless of individual circumstances, not filing tax returns is a prosecutable federal crime. IRS agents have a habit of waiting until people are comfortable before moving in with swift, decisive action.
2. Pay Tax Bills on Time
The best way to avoid tax problems is to pay taxes fully and in a timely fashion. Beyond simply paying late fees and penalties, late payers increase their likelihood of facing audit. The IRS uses a software algorithm to influence its random selections of taxpayers for auditing. While the IRS naturally keeps details of this algorithm secret, any taxpayer actions that hint at noncompliance can likely cause problems.
3. Find Professional Tax Help
Fortunately, experienced accountants and tax attorneys have mastered plenty of techniques for guiding their clients avoid tax headaches. These attorneys can help people negotiate settlements with the IRS. Without these settlements, people can struggle with burdensome tax liens on their properties and possessions.
4. Communicate With the IRS
Individuals with tax problems should continue communicating with the IRS, no matter how unpleasant these interactions may become. Without adequate communication, the IRS may take drastic action by issuing levies. Levies are direct, enforceable requests for money from banks or other responsible institutions. For example, the IRS serves levies to banks to tap bank accounts for unpaid taxes. The IRS generally only issues levies when taxpayers are totally non-compliant.
5. Understand the Authority of the IRS
Some taxpayers simply postpone IRS negotiations with honorable intentions to comply at later times. Many assume that tax bills are subject to statues of limitations and are waiting until their problems disappear. Remarkably, the IRS is not bound by any statute of limitations. The IRS has tremendous power to seize homes, cars and all other assets. The tax authority continually gains new powers to harass and hound taxpayers. By exercising prudence and utilizing professional help, taxpayers can usually avoid IRS tax problems.
This is simply some advice to help you stay out of IRS tax problems, not a solicitation for legal services or tax help.
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By Jordan Mallory, a single mom with experience working in taxes who writes as a hobby on the side.
Categories: Federal Tax, Income Tax, State Tax, Tax Evasion, Tax Law Tags: IRS, irs audit, irs extension, irs tax credits, irs tax services, irs wage garnishment
Why Did My Taxes Get Audited?
If you have recently been notified by the IRS that you are being audited, then you may find yourself feeling stressed out and wondering why this is happening to you. After all, the odds of having your tax return chosen for audit by the federal government are extremely low. However, there are some red flags that the government looks for as they are reviewing tax returns that can dramatically increase the taxpayer’s chances of being chosen for an audit. Some of the most common red flags and reasons for auditing are described in detail in this article. Becoming aware of these reasons can help you to avoid making the same mistake in the future or, if you are reading this out of curiosity, can even help you to avoid being audited in the future.
Being Self-Employed
If you do not have a W2 job that requires you to have your taxes deducted from each paycheck, then there is a larger chance that you will be audited. This is because self-employed individuals do not have taxes deducted from their pay and thus must file to pay quarterly estimated tax payments. Since self-employed workers often work as contractors for various companies and individuals, there may not be an official record of their earnings. As a result, it is easier for self-employed workers to falsely report their income in an effort to pay less in taxes. As a result, the federal government tends to scrutinize these returns quite heavily.
Itemizing and Taking Many Deductions
Aside from being self-employed, itemizing and attempting to take a lot of tax deductions can be a red flag for the government and may lead to an audit. All taxpaying citizens are entitled to some basic deductions, but there are others that are meant for people in very specific situations. For example, college students may be eligible for a number of deductions that can greatly reduce their tax liability and even entitle them to a refund. Attempting to falsely claim these or heavily itemizing may be suspicious to the federal government and could lead to audit.
Being in a Higher Tax Bracket
In general, the government is less likely to audit somebody in one of the lower tax brackets than those in higher ones. This is because the amount of money one could be cheating the government out of is often much, much higher in the higher brackets. However, this does not mean that lying or cheating on a tax return will not lead to an audit for those in lower brackets.
This article was provided by Todd S. Unger, Esq., a tax attorney based in New Jersey that can help individuals and small businesses with all federal tax controversey issues including IRS tax audits.
Categories: Federal Tax, Income Tax, Tax Law Tags: irs audit, irs tax, taxes