It is no secret that the Internal Revenue Service (IRS) is a large and complex organization. Even so, it is not as intricate as the tax laws they monitor and enforce. If you have ever had to actively engage in legal action regarding tax laws, you have probably quickly realized that the complexity of the process can feel overwhelming. If you are facing an audit, one of the most comforting things you can do is to learn about your rights.
As we move into fall, many individuals who sought an extension are continuing to work on tax issues. Similarly, business owners often look to begin to reconcile the books at this time of year and adjust strategies to push to make year-end goals. Many decisions made during the fall tax season are aimed at reducing income tax exposure during the following calendar year. The importance of remaining mindful of the tax implications of decisions made today (and everyday) cannot be understated.
For individuals and businesses in Ohio and throughout the country, receiving a notice or letter in the mail from the IRS can be a confusing, even frightening experience. Perhaps you are being audited, accused of criminal tax evasion, or are the target of an IRS criminal investigation.
Many people in Toledo are looking forward to getting their income tax refund. Some see this check issued by the IRS as a sort of “bonus,” though in fact it was their money all along. But what happens when the check never arrives?
Everyone knows that the due date for filing your federal income taxes usually is April 15. But for one reason or another, sometimes taxpayers are unable to file by that date. Sometimes an emergency has arisen that kept you from taking care of it. Or key documents have gotten lost or proved hard to track down.
The IRS has the power to put liens on your property and even seize it outright, garnish your wages and do other things to those it accuses of owing back income taxes. Soon, it will also be able to limit your ability to travel.
The IRS audited the income tax returns of slightly more than 1.2 million people during the last fiscal year. That may sound like a lot of audits, but it is actually the fewest the IRS has pursued in 11 years.
Sometimes life overwhelms you and wreaks havoc on your finances. The loss of job, a serious illness or disability, divorce, the failure of a business, these are some of the common reasons I hear from people who seek help with their IRS, State and Local back tax obligations. Many people are still attempting to recover from the Great Recession of 2008 and 2009 and some many never be able to recover their financial footing. If that is the case, someone with IRS, State or local back tax debt may need time to attempt to recover without having to deal with potentially devastating collection action. Or in the case of someone who will never recover, their obligations may need to be put on permanent hold.Fortunately, the IRS and many state and local tax agencies are willing to back off for a while to allow someone to recover. The IRS has an official designation for people who cannot pay their back tax debt at the current time. This is called "Currently Non-Collectible Status". ("CNCS") If someone is declared CNCS, the IRS will stop all intrusive collection efforts for a minimum of 18 months. During this time, no payments are required and no wage or bank levies or garnishments will occur. CNCS is also the first step towards getting the IRS to accept an Offer in Compromise. More on that at another time. If during this time the taxpayer is able to recover sufficiently to begin to make payments, the IRS will revoke CNCS and a reasonable payment arrangement will need to be established.In order to be declared CNCS, you must provide proof of all household income and expenses either through an interview process with the IRS Collection Division or through the submission of a form 433A to a local Revenue Officer. If your income is barely enough to meet reasonable living expenses, with nothing left over, you can be declared CNCS. This is true even if you have equity in a home (unless you can borrow on that equity) or have funds in a retirement account.In some cases, the tax authorities can be convinced that back tax obligations will never be paid and should therefore be written off. This can sometimes be done with state and local agencies and ultimately the IRS will write off your balance once the obligation is more than 10 years old.
Owing back taxes to the IRS is a very serious matter. However, familiarity with IRS procedures and limitations will help keep the burden from overwhelming you. Naturally, the IRS wants you to pay as much as you can and as quickly as possible. This is primarily because they have a limited time to collect. By law, the IRS has 10 years from the date taxes are assessed against you to collect them. After 10 years is up, the tax becomes uncollectible and any related liens must be released. This is called the Statute of Limitations.