Understanding the basics: IRS Tax Problems 101 With Lucent Tax Relief
Benjamin Franklin once said there were only two things certain in life: death and taxes. What Franklin failed to mention was just how complicated taxes can be and that they can be difficult to understand when problems arise.
What are some common tax problems?
If someone owes more than $10,000 in taxes, the IRS may file a lien on their name. Meaning, the IRS will be paid first if someone sells something like a car or their home.
Tax Levy or Garnishment
The IRS has the right to collect money owed using various methods. Some of those methods include:
- Levying a person’s bank account
- Garnishing their wages or social security and disability benefits, among other things
Unfiled Tax Returns
Failing to file tax returns. More common than you might think and can be resolved relatively easily.
- Failure to File Penalty: IRS will impose a failure to file penalty plus interest on the taxes not paid.
- Professional License: A professional license could be revoked until returns are filed and a taxes owed paid.
- Tax Refunds: The only way to receive a tax refund is to file a return within three years of the original filing date.
- Interest and Penalties on Taxes Owed: If taxes are owed, interest and penalties will be added to the amount due. This could make a bad situation even worse and cause your tax bill to grow much larger.
How will I know if I owe taxes or have unfiled returns?
If a person is being audited, if taxes are owed that the IRS is attempting to collect, or if the IRS needs to contact you for any reason, they will send a letter. All letters from the IRS are important, so be sure to open and read carefully, but some might be more time sensitive than others. Letters like a Notice of Deficiency (commonly referred to as a “90 Day Letter”) or letters where the IRS is warning you of a levy or garnishment have deadlines within which to respond. No matter the type of letter, do not ignore the IRS.
What are some options when seeking tax resolution?
If there is an amount due, pay it as soon as possible. Avoid having additional interest and penalties add up.
Pay the Correct Tax Only
Be sure to review the calculated amount to ensure it is correct. The IRS makes mistakes, but there’s only so much time to dispute the amount owed if it’s incorrect.
Offer in Compromise
In some cases, the IRS will accept a lump sum that is less the total amount owed. It’s a lengthy process, typically lasting six months to a year, to convince the IRS that it will not be able to collect the full amount due to financial circumstances. Be sure to evaluate with a tax professional before making the offer.
If the Offer in Compromise isn’t a good fit, it’s possible that paying owed taxes in installments could be an option.
Currently Not Collectible
The IRS may determine that certain people might be unable to pay anything at the current time and will classify them as “currently not collectible.” The taxes are still owed and the interest and penalties add up, but collection action is put on hold while the financial situation remains the same.
While the above information might seem complicated, we’re here to help. Unlike Benjamin Franklin, we don’t believe death and taxes are the only things certain in life. We at Lucent are certain if you find yourself in any of the situations listed above, we will do our best to try to help you. And, if you choose to work with us, our guarantee to you is that the process will be Lucent: transparent, reliable and accountable.
Download the ebook, Understanding the Basics: IRS Tax Problems 101 to learn more!
Claudia Revermann, Lucent Tax Relief Co-Founder, Attorney at Law, CPA
Claudia Revermann has been practicing law for 16 years. She also has 20 years of tax practice experience, holding a Certified Public Accountant license and having previously worked as a tax accountant in a large regional accounting firm. She opened her own law firm in June 2015, where her primary focus is to educate and serve her clients with confidence and humbleness. In order to maintain those values of providing skilled and understandable advice to tax clients, Claudia partnered with Andrew Hawkins to form Lucent Tax Relief.