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Tax Problems

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Tax Problems and the IRS Collection Process Overview

If you are being targeted by the IRS for unpaid taxes, you are probably feeling the pressure of the IRS collections process. As you’re already aware that is an unpleasant experience.

It’s easy for life to get in the way of maintaining tax compliance. Sometimes it involves divorce, illness, a job loss, or the additional demands of being a single parent. For others, it’s the responsibility of running their own business, stretching their money and time. Missing a couple of years can feel overwhelming and the issue often snowballs. We see it every day and assure our clients that their situation is more common than they realize and ther is hope.

The information below outlines the most common problems taxpayers experience that cause IRS and state collections issues. If any of these issues look familiar, there is no reason to delay. We remove them from people’s lives every day. Let Total Tax help you TODAY.

Common Tax Problems:

This is often where it all starts. If you fail to file a tax return, the IRS will file one for you – it’s called a substitute filing. The IRS uses W2s and 1099s from your employer(s) and other payers to complete the filing. It doesn’t include many of the deductions that you would take if you filed a return.

The tax return the IRS files for you (substitute filing) can show more taxable income, a higher tax rate, and greater tax liability than if you filed a return. So obviously, the best starting point for resolving any tax issue is to make sure your tax returns are filed correctly and include every deduction you are entitled.

*Note: When choosing someone to resolve your tax problems, be sure they have the desired expertise in tax preparation. Some companies will opt to prepare “transcript returns” these are essentially the same as what the IRS would prepare. While it saves the company time, it can cost you a much higher tax balance.

One common scenario for employees and the self-employed alike is not withholding enough taxes throughout the year. It makes tax-day no fun for you or your accountant when they have to deliver the bad news. Additionally, large tax balances can also be the result of the sale of assets like real estate, or retirement distributions.

It’s important to move quickly on these outstanding balances. The IRS adds penalties for late payment and interest on the balance. Depending on your specific situation, there are several resolution options and IRS programs that may be available to you.

The IRS will apply penalties when a taxpayer is out of compliance. The most common out of compliance situations are:

  • Failure to File: If you fail to file your tax return on time, the IRS will impose a penalty of 5% of the original balance owed per month up to a max of 25%.
  • Failure to Pay: If you do not pay the balance owed by the deadline, the IRS will impose a penalty of .5% per month of the original balance up to a maximum of 25%.
  • Estimated Tax Penalty: The IRS will impose a penalty for failure to make sufficient prepayments. A common misunderstanding is that we pay our taxes once a year. However, the system is a “pay as you go” system. Failure to make estimated tax payments or withhold taxes from wages is considered delinquent payment and can result in penalties.
  • Accuracy-Related Penalty: If the IRS has reason to believe that a mistake you made on your tax return was negligent or a substantial understatement, they can impose a penalty. The penalty is equal to 20% of the portion of the understatement attributable to the error.

If you are unable to pay anything because of a current financial hardship, the IRS can file a Notice of Federal Tax Lien. This does not change the amount you owe to the IRS. They will continue to charge you interest and late payment penalties on the balance due.
The federal tax lien is a legal claim to your property, including property acquired after the lien is filed. A lien automatically arises when you fail to pay the taxes in full you owe within ten days after the first IRS notice of taxes owed and demand for payment and assesses the tax.

The government also may file a Notice of Federal Tax Lien in the public records. A Notice of Federal Tax Lien publicly notifies creditors that the IRS has a claim against all your property, including property acquired after the Notice of Federal Tax Lien is filed. The filing of a Notice of Federal Tax Lien may appear on your credit report and may harm your credit rating.

The IRS also may use a levy or wage garnishment to collect taxes. A levy or garnishment can target your wages, bank accounts, Social Security benefits, and retirement income. The IRS also may seize your property to sell the property to satisfy a tax balance including your car, boat, or real estate.

In addition, any future federal tax refunds or state income tax refunds that you are owed may be applied to your federal tax liability.

The IRS will assign a Revenue Officer to your case when it meets certain circumstances and they believe it will increase the probability of collection.

A Revenue Officer will impose requirements and deadlines for compliance and payment. They have independent power to seize property and impose bank and wage levies. They can and do visit your home and business to facilitate compliance and collections.

The IRS may audit your tax returns randomly, or if they detect errors or suspect fraud. An IRS examiner will request documentation for the entries on your tax return that are in question. The process can take weeks to complete. For complex calculations like operating losses and sales of stock and real estate, failing to have detailed records can result in a big tax bill, penalties and interest.

State taxing authorities vary in their approach to unpaid tax balances. Most use similar collections tactics to that of the federal government, but the programs available to resolve the unpaid balance can be very different. In some cases, the assessed tax liability cannot be reduced and the state can be more aggressive about escalating to collections such as garnishments. The IRS often has more options.

Taxpayers that have a liability to both a state and the IRS, and do not have the funds to pay both, may find that it makes sense to use their available resources to pay the state and work toward a resolution with the IRS. State tax balance adds a layer of complexity to tax problems. Consulting with a tax professional can clarify your options.

Important IRS Collection Notices:

We understand that any collection letters are daunting, especially if they are from the IRS. If you have received one of the below collection letters from the IRS do not waste any time and give us a call for a free consultation today. Let us help you get on track to financial freedom from the IRS.

Notice LT17 explains that you owe taxes and how to pay them, financial hardships, and your appeal rights.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

You have an outstanding tax balance that the IRS is trying to collect. If you’re unable to pay the balance in full, you may qualify to make payments with an installment agreement.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

You have past due taxes and the IRS been unable to reach you. Call us immediately. Request an appeal to the proposed levy action by following the instructions on the letter.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

Initial notification of unpaid taxes.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

Reminder notification of unpaid taxes, penalty and interest.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

IRS has received your payment; however, there’s still an outstanding balance.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

IRS sent this notice because you have a balance due (money you owe the IRS) on one of your tax accounts.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

IRS sent this notice because they haven’t heard from you and you still have an unpaid balance on at least one of your tax accounts.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

A restitution-based assessment was made under Internal Revenue Code (IRC) Section 6201(a)(4), in accordance with the court’s restitution order. The amount due is based on the amount of restitution you were ordered to pay, which may include penalties and interest as ordered by the court.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

These notices from the IRS remind you about the amount you owe in tax, penalty, and interest.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

The IRS made the changes you requested to your tax return for the tax year on the notice, which also changed your shared responsibility payment.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

The IRS sent this notice because you have an unpaid balance due.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

The IRS is notifying you of their intent to levy certain assets for unpaid taxes. You have the right to a Collection Due Process hearing.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

The IRS is notifying you they intend to levy up to 15% of your social security benefits for unpaid taxes.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

The IRS is notifying you they have levied your state tax refund for unpaid taxes. You have the right to a Collection Due Process hearing.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

Your federal tax is unpaid. The IRS asked you to pay the tax but haven’t received your payment. They issued a notice of levy to collect your unpaid taxes.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

The IRS sent you this notice to tell you we used all or part of your refund to pay a tax debt.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

The amount of your refund has changed because we used it to pay your spouse’s past due tax debt.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

The IRS used a refund from your spouse or former spouse to pay your past due tax debt. You may still owe money.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

You received this notice because the IRS hasn’t received payment of your unpaid balance. This notice is your Notice of Intent to Levy (Internal Revenue Code Section 6331 (d)). If you don’t pay the amount due immediately, the IRS can levy your income and bank accounts, as well as seize your property or your right to property including your state income tax refund to pay the amount you owe.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

The IRS has not received your payment for overdue taxes. They intend to seize your property or rights to property. You must contact us immediately.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

Your federal employment tax is still not paid.The IRS issued a notice levy to collect your unpaid taxes.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

The IRS is notifying you of their intent to levy certain assets for unpaid taxes. You have the right to a Collection Due Process hearing.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

The IRS is notifying you they intend to terminate your installment agreement.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

The IRS is notifying you that they’ve assigned your tax account to a private collection agency for collection.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

If you received a simple LT16 notice, it’s because the IRS is trying to collect unpaid taxes from you and/or our files show they’re missing tax returns from you.

It is essential that you take action in order to avoid potential enforcement action, which can include seizing your assets or wages. Enforcement action could also include the filing of a notice of federal tax lien, which could affect your credit score and ability to borrow.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

The IRS didn’t receive your tax return. They calculated your tax, penalty and interest based on wages and other income reported to IRS by employers, financial institutions, and others.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

The IRS couldn’t locate the return you said was previously filed.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

The IRS is holding your refund because you have not filed one or more tax returns and we believe you will owe tax.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

The IRS sent you this letter because they have no record that you filed your Form 1040 income tax return.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

This notice serves as a reminder that the IRS still has no record that you filed your prior tax return or returns.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

This is a FINAL reminder notice that the IRS still have no record that you filed your prior tax returns.

What If You Don’t Respond

IRS may take future enforcement action, such as:

  • seizure of your assets or wages and
  • filing federal tax liens, which may affect your credit score.

Also, additional interest and penalties may accrue.

Tax Relief certifications

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