Tax Problems: Why People Get Into Problems With the IRS?
Tax problems: Why People get Into problems with the IRS? You don’t want to mess with the Internal Revenue Service. One small mix-up when handling your finances can cost you big.
For example, in recent years the IRS has increased its filing of levies, liens and wage garnishments. In fact, in 2004 alone, approximately 2.5 million levies were filed.
The experts offer this list of common ways people get into trouble with the IRS.
- Filing too many exemptions. An exemption gives you a major tax deduction, and some taxpayers can’t resist the temptation to report more exemptions than they’re entitled.
You can only claim exemptions for yourself, a spouse and for all “dependents.” Dependents have to meet specific criteria, however, so make sure you follow the IRS guidelines so that you don’t mistakenly file an extra exemption.
- Being unaware of taxes levied for early withdrawal from certain retirement plans. If you withdraw from a retirement fund such as a 401(k) or IRA before you’re 59 1/2, you may face a 10 percent federal penalty on your investments, as well as a state penalty and an income tax on the money withdrawn.
- Not paying enough taxes when self-employed. Many people who own their own businesses don’t know how much they have to pay in taxes. The tax structure for a self-employed person – what to pay, how to pay and what can be deducted – is decidedly complex, so it’s easy to become confused.
- Not paying taxes on winnings. It is necessary to report all gambling winnings, including winnings from lotteries, casinos, and horse races, as income.
For people who are in trouble with the IRS, there are various programs available that can provide debt relief if a taxpayer qualifies. JK Harris helps its clients determine if they meet the requirements for one of these IRS programs. Its staff includes former IRS agents, certified public accountants, attorneys, enrolled agents, and other experts that offer tax services, financial planning, small business services and other assistance.
Your IRS Tax Appeal Rights
Are you in a situation of a disagreement with the IRS? Everyone have the guaranteed rights for all taxpayers is the right to appeal. If you disagree with the IRS about the amount of your tax liability or about proposed collection actions, you have the right to ask the IRS Appeals Office to review your case.
During their contact with taxpayers, IRS employees are required to explain and protect these taxpayer rights— Including the right to appeal. The IRS appeals system is for people who do not agree with the results of an examination of their tax returns. And other adjustments to their tax liability they may have made. In addition to examinations, you can appeal many other things, including:
- Collection actions such as liens, levies, seizures, installment agreement terminations and rejected offers-in-compromise,
- Penalties and interest, and
- Employment tax adjustments and the trust fund recovery penalty.
Internal IRS Appeal conferences are informal meetings.
The local Appeals Office, which is independent of the IRS office, can sometimes resolve an appeal by telephone or through correspondence.
The IRS also offers an option call Fast Track Mediation. During which an appeals or settlement officer attempts to help you and the IRS reach a mutually satisfactory solution. Most cases not docketed in court qualify for Fast Track Mediation. You may request Fast Track Mediation at the conclusion of an audit or collection determination, but prior to your request for a normal appeal hearing. Fast Track Mediation is meant to promote the early resolution of a dispute. It does not eliminate or replace existing dispute resolution options, including your opportunity to request a conference with a manager or a hearing before Appeals. You may withdraw from the mediation process at any time.
When attending an informal meeting or pursuing mediation, you may represent yourself. You also can be represented by an attorney, certified public accountant or individual enrolled to practice before the IRS.
If you and the IRS appeals officer cannot reach agreement, or if you prefer not to appeal within the IRS, in most cases you may take your disagreement to federal court. Usually, it is worth having a go at mediation before committing to an expensive and time-consuming court process.