Forget about the FBI or the CIA. The IRS is easily the
most feared government agency in the U.S. Created in 1862 by Abraham Lincoln,
the Internal Revenue Service is responsible for collecting taxes and enforcing
the Internal Revenue Code. Few Americans are aware of the fact that income tax
was enacted to cover the cost of war expenses during the Civil War. As critics
are quick to point out, income taxes are not mentioned in the original
Constitution. After all, the Founding Fathers were fighting against excessive
and unreasonable taxation.
But whether we like it or not, the Sixteen Amendment to the U.S. Constitution
(1913) gave the government the legal right to collect personal income taxes. It
also made it a crime for any citizen to refuse to pay his taxes. According to
the IRS, about one percent, or 13 million taxpayers are audited each year.
An audit is authorized when the IRS determines that an individual taxpayer
erroneously claimed deductions or exemptions, or failed to report income. IRS
examiners will review your tax return and may ask you to provide documentation
to support your claims, which they go over with a fine-tooth comb. If a single
entry is out of place, they may order the taxpayer to pay more.
Whether the result of audit findings, forgetting to file tax returns, or not
being able to pay your taxes in full, IRS tax debt is something you must deal
with sooner rather than later. According to the IRS, over twenty million
American citizens owe back taxes. Some owe hundreds, others owe thousands. The
total estimated shortfall is over two hundred billion dollars. What should you
do if you are being dunned by the IRS?
First and most importantly, you should not panic. Yes, the IRS is scary, but
they don�t want to throw you in prison. What they want is their money. It is
true that if you fail to file your return or pay what you owe, they will come
after you to make sure you do, but their end goal is simply to collect the back
taxes owed to the government. Getting audited is not a criminal accusation. It
simply means that you may have made a mistake.
Serious tax questions can only be answered by a trained professional. If you
owe a substantial sum in back taxes, it may be a good idea to contact a tax
consultant or advisor. No matter how much you owe, a tax professional can
determine the best course for reducing your tax debt. Let us take a moment to
discuss the kind of tax advice you might receive from an enrolled agent,
attorney, or accountant.
Negotiate a Compromise
One in every seven taxpayers owes back taxes. With statistics like that, the
IRS can�t afford to make acceptions or spend too much time on any one taxpayer.
More often than not they will take what they are allowed by law according to
the law. If you happen to qualify according to IRS guidelines, a tax accountant
may recommend an offer in compromise. As they often say, a good deal is one
where both parties walk away unhappy. In this circumstance, tax accountants can
help a taxpayer gather all the information and documentation required to settle
your tax debt. It is important to understand that your tax professional acts as
your representative, not your negotiator. Arriving at an amount to offer in the
offer in compromise depends largely on what you owe, what the IRS can expect to
collect if they continue hounding you for payment, and how much money the IRS
thinks you�ll make in the next ten years.
Installment Agreements
Since few taxpayers that owe back taxes can afford to pay them all at once, the
IRS will often let you pay your tax debt in installments. When stretched over a
long enough period of time, tax accountants should be able to negotiate a deal
that lets you pay your debt with monthly installments you can afford. But be
careful. If you lapse on a payment, the IRS can and will levy your bank account
for the amount due. Just so you know, the first question they ask you when you
set up a payment plan is, �Where do you bank?� The reason is they want know
where to find your money if you miss a payment.
For more information on tax debt reduction, consult a reputable tax advisor or
consultant.
most feared government agency in the U.S. Created in 1862 by Abraham Lincoln,
the Internal Revenue Service is responsible for collecting taxes and enforcing
the Internal Revenue Code. Few Americans are aware of the fact that income tax
was enacted to cover the cost of war expenses during the Civil War. As critics
are quick to point out, income taxes are not mentioned in the original
Constitution. After all, the Founding Fathers were fighting against excessive
and unreasonable taxation.
But whether we like it or not, the Sixteen Amendment to the U.S. Constitution
(1913) gave the government the legal right to collect personal income taxes. It
also made it a crime for any citizen to refuse to pay his taxes. According to
the IRS, about one percent, or 13 million taxpayers are audited each year.
An audit is authorized when the IRS determines that an individual taxpayer
erroneously claimed deductions or exemptions, or failed to report income. IRS
examiners will review your tax return and may ask you to provide documentation
to support your claims, which they go over with a fine-tooth comb. If a single
entry is out of place, they may order the taxpayer to pay more.
Whether the result of audit findings, forgetting to file tax returns, or not
being able to pay your taxes in full, IRS tax debt is something you must deal
with sooner rather than later. According to the IRS, over twenty million
American citizens owe back taxes. Some owe hundreds, others owe thousands. The
total estimated shortfall is over two hundred billion dollars. What should you
do if you are being dunned by the IRS?
First and most importantly, you should not panic. Yes, the IRS is scary, but
they don�t want to throw you in prison. What they want is their money. It is
true that if you fail to file your return or pay what you owe, they will come
after you to make sure you do, but their end goal is simply to collect the back
taxes owed to the government. Getting audited is not a criminal accusation. It
simply means that you may have made a mistake.
Serious tax questions can only be answered by a trained professional. If you
owe a substantial sum in back taxes, it may be a good idea to contact a tax
consultant or advisor. No matter how much you owe, a tax professional can
determine the best course for reducing your tax debt. Let us take a moment to
discuss the kind of tax advice you might receive from an enrolled agent,
attorney, or accountant.
Negotiate a Compromise
One in every seven taxpayers owes back taxes. With statistics like that, the
IRS can�t afford to make acceptions or spend too much time on any one taxpayer.
More often than not they will take what they are allowed by law according to
the law. If you happen to qualify according to IRS guidelines, a tax accountant
may recommend an offer in compromise. As they often say, a good deal is one
where both parties walk away unhappy. In this circumstance, tax accountants can
help a taxpayer gather all the information and documentation required to settle
your tax debt. It is important to understand that your tax professional acts as
your representative, not your negotiator. Arriving at an amount to offer in the
offer in compromise depends largely on what you owe, what the IRS can expect to
collect if they continue hounding you for payment, and how much money the IRS
thinks you�ll make in the next ten years.
Installment Agreements
Since few taxpayers that owe back taxes can afford to pay them all at once, the
IRS will often let you pay your tax debt in installments. When stretched over a
long enough period of time, tax accountants should be able to negotiate a deal
that lets you pay your debt with monthly installments you can afford. But be
careful. If you lapse on a payment, the IRS can and will levy your bank account
for the amount due. Just so you know, the first question they ask you when you
set up a payment plan is, �Where do you bank?� The reason is they want know
where to find your money if you miss a payment.
For more information on tax debt reduction, consult a reputable tax advisor or
consultant.
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