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How Individuals Often Find Themselves in IRS Trouble

October 18, 2023

Avoid these 10 Pitfalls

Paying taxes is a civic responsibility that every working American is subjected to. However, millions of Americans find themselves in hot water with the IRS. Some are intentional and others are inadvertent, but understanding the common ways people get into tax troubles can help in avoiding these pitfalls. 

Here are 10 common ways taxpayers run into IRS trouble. If you find yourself owing $10,000 or more to the IRS or state, reach out to our tax resolution firm for a free consultation.

Failing to File Returns
Perhaps the most direct way to invite IRS scrutiny is simply not filing a tax return. Some people, especially those anticipating a tax bill, might decide to avoid filing. This can result in failure-to-file penalties, which can add up quickly. The IRS will not let this go unnoticed. It is also important to note that you can go to prison for a year and be fined $10,000 for each legally required tax return that is not filed.

Incorrectly Reporting Income
Intentional or unintentional underreporting of income is a red flag. Discrepancies between the income reported to the IRS by employers (via W-2s or 1099s) and what's declared on individual or business returns can trigger audits.

Claiming Excessive Deductions
While tax deductions can significantly reduce tax liability, overstepping by claiming excessive or unwarranted deductions can be problematic. This includes inflating charitable donations or exaggerating business expenses.

Ignoring IRS Notices
The IRS often sends notices for minor discrepancies or requests for additional documentation. Ignoring these can escalate the issue, leading to more severe consequences.

Engaging in Tax Evasion Schemes
Illegal schemes, such as hiding money in offshore accounts or engaging in identity theft and fraudulent returns, are serious offenses that can lead to criminal charges. It is not a crime for taxpayers to use the tax code to legally find ways to pay less taxes. However, some people get a little too creative or they get the wrong advice. Consult with a tax professional before engaging in schemes to lower your taxes.

Misclassifying Workers
Business owners might be tempted to classify workers as independent contractors rather than employees to save on taxes. However, if the IRS determines this is a misclassification, it can lead to back taxes and penalties.

Not Making Estimated Tax Payments
Self-employed individuals and some other taxpayers often need to make quarterly estimated tax payments. Failure to make these payments or underestimating the amount can result in penalties and often a surprise tax bill.

Not Reporting Foreign Income
U.S. citizens and resident aliens are typically required to report worldwide income, including from foreign trusts and bank accounts. Overlooking or intentionally omitting this can lead to substantial penalties.

Engaging in High-Transaction or Cash Businesses
Those engaged in businesses that deal primarily in cash transactions (like restaurants, construction, or salons) are often under the IRS radar for underreporting income. Keep good records in case of an audit.

Ignoring State Tax Obligations
While much focus is on federal taxes, individuals also have state tax obligations. Neglecting to file state returns or not paying state taxes can lead to trouble at the state level.

What happens if you land in tax trouble
IRS problems, once initiated, can escalate quickly, leading to hefty fines, penalties, or even legal actions. Being aware of these common pitfalls and ensuring compliance can help individuals maintain a clear record and avoid unnecessary complications with tax authorities. When in doubt, it's always advisable to seek advice from tax professionals or experts in the field.

If you're facing IRS problems and owe $10,000 or more in back taxes or are being audited, reach out to our tax resolution firm, and we'll schedule a free and confidential consultation to explain your options thoroughly and help you permanently resolve your tax problem.

Understanding the LT11 Letter: Take Immediate Action

By 7066766659 • December 30, 2024
Receiving an LT11 letter from the IRS can be incredibly unsettling. This notice is a serious warning that the IRS is prepared to take tough action to collect unpaid taxes. If you’ve received this letter, it’s important to understand what it means and why you need to act quickly. What is an LT11 Letter? An LT11 letter, also known as the "Final Notice of Intent to Levy and Notice of Your Right to a Hearing," is sent by the IRS when you have unpaid taxes and haven’t responded to previous notices. This letter means the IRS is ready to levy your assets, which means they can legally take your property to pay off the tax debt. This could include money in your bank accounts, your wages, your home, or other valuable belongings. What Can Happen If You Ignore It? If you ignore an LT11 letter, the IRS can take serious actions, such as: Seizing Money from Your Bank Account: The IRS can freeze your bank accounts and take the money. Garnishing Your Wages: Your employer will have to send a portion of your paycheck to the IRS. Taking Your Property: The IRS can seize your house, car, or other valuable items. Damaging Your Credit Score: A levy or lien can hurt your credit score, making it hard to get loans or credit in the future. Why You Need to Act Quickly The LT11 letter gives you only 30 days to respond. Within this time, you have the right to request a Collection Due Process (CDP) hearing. This hearing is your chance to dispute the levy action, propose a different payment plan, or challenge the amount you owe. If you don’t act within these 30 days, the IRS will start the levy process, and your options will be very limited. The Importance of Professional Help Dealing with the IRS and resolving tax problems can be very complex, and trying to handle it on your own can lead to mistakes that might make your situation worse. A tax resolution professional has the knowledge and experience to help you navigate this challenging process. Benefits of Professional Help: Expert Negotiation: A professional can negotiate with the IRS on your behalf to secure the best possible terms. Strategic Planning: They can develop a plan to resolve your tax issues without causing financial hardship. Legal Protection: A professional ensures that your rights are protected throughout the process. If you’ve received an LT11 letter, don’t wait another moment. Contact Advantage Tax Relief immediately at 630-773-3200. Advantage Tax Relief is a skilled tax resolution firm that can help you navigate your tax issues and achieve the best possible outcome. Call Advantage Tax Relief NOW at 630-773-3200 to prevent the IRS from taking your hard-earned money and assets.

What to Do If You Have an IRS Balance: Solutions from Advantage Tax Relief

December 9, 2024
Dealing with an IRS Balance? Reach out to Advantage Tax Relief today to solve all of your IRS problems! Receive expert guidance and support from a professional expert.

How to Handle a CP523 Notice from the IRS

November 25, 2024
What is a CP523 Notice from the IRS? Receiving a CP523 notice is a serious matter. It’s an official communication from the IRS informing you that your tax installment agreement has been canceled. This typically happens when you fail to make payments or violate the terms of your repayment plan. If you’ve gotten this notice, it means the IRS is prepared to take further action, so it’s critical to understand what it means for your situation. Why You Need to Act Now A CP523 notice signals that your repayment agreement is no longer in effect. Without an active installment plan, the IRS has the authority to initiate collection actions against you, including: Wage Garnishments: The IRS can garnish your wages without additional warning. Bank Levies: They may seize funds directly from your bank account. Liens on Property: The IRS could place liens on your property, affecting your ability to sell or refinance. Ignoring the CP523 notice can lead to significant financial consequences, such as: Immediate Tax Payment Demand: You could be required to pay your entire outstanding balance in full, which can be overwhelming. Escalating Collection Efforts: The IRS can move quickly to enforce collection actions if you don’t address the notice in a timely manner. Damage to Your Credit: Unresolved tax issues can severely impact your credit, making it difficult to secure loans, credit, or even housing. Steps to Take if You Receive a CP523 Notice While receiving a CP523 notice can feel intimidating, there are clear actions you can take to prevent further issues: 1. Respond Promptly: Time is critical. The sooner you take action, the better your chances of avoiding severe consequences. 2. Review the Notice Carefully: Understand the reason your installment agreement was canceled, the amount you owe, and any deadlines for taking action. 3. Evaluate Your Financial Situation: Take stock of your finances and explore your options for resolving your debt. This might include reinstating your installment agreement, negotiating new terms, or looking into other tax relief solutions. 4. Contact the IRS: Reach out to the IRS as soon as possible to discuss your situation and find out what steps you need to take to get back on track. 5. Consider Professional Help: Navigating the IRS system can be complex, but you don’t have to do it alone. A tax professional like John Bruszewski at Advantage Tax Relief can help you negotiate with the IRS, review your options, and work toward a favorable outcome. Don’t Wait – Get Help Now Ignoring a CP523 notice can make matters worse. It's essential to act quickly and seek guidance from a trusted expert. John Bruszewski at Advantage Tax Relief is here to help you understand your options, negotiate on your behalf, and guide you through the process. Call for a Free Consultation Don’t wait until it’s too late. Call Advantage Tax Relief today at 630-773-3200 for a risk-free consultation and get the help you need to resolve your tax issues and protect your financial future.
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