Dealing with the IRS can be a stressful and overwhelming process. However, neglecting an income tax problem can have serious consequences such as IRS levies, penalties, fines, or even criminal liability. As soon as you realize that you may have an income tax problem or receive notice of such a problem from the IRS, you need to seek legal advice.
In this video, Bill Henry, managing partner of Robinson & Henry, P.C, discusses dealing with the IRS.
Remember, it is never too late to deal with your IRS problems. We offer a free 30 minute case assessment to discuss your options.
Income tax problems come in a variety of forms but the most common issues are addressed below.
Failure to File an Income Tax Return
Every individual must file a federal income tax return if your income exceeds a specified level which varies based on age, filing status, and the type of income you received. Even if your income falls below that pre-determined level, there are some benefits to filing a return such as eligibility for a refund on taxes withheld from wages or to receive certain tax credits.
However, every year, people across the country do not file their income tax return for a variety of reasons. Perhaps you just didn’t have the money to pay your taxes or perhaps you believed that your income fell below the minimum threshold. For whatever reason, the IRS may – even years later – file a return for you, based on information collected from those paid you. This can be a very costly situation that often results in the negligent taxpayer not only being liable for tens of thousands of dollars of back taxes, but also being assessed penalties and interest that leave them in an even deeper hole. Generally, the IRS failure-to-file penalties are more than failure-to-pay penalties so filing your return, even without paying your tax debt in full, can be beneficial.
If you neglected to file a tax return this year or in years past, it is important that you contact Robinson & Henry immediately for advice and representation. Our experienced tax attorneys can help you file a past due tax return and work with the IRS to try to negotiate a settlement of tax liabilities or penalties.
Failure to Pay Income Taxes
Failing to pay income taxes owed is a different from failing to file a tax return. While the penalties are generally harsher for failing to file, failure to pay or not paying your full tax liability can have serious consequences. One of the most common reasons that individuals do not pay their income tax is that they do not have the money to pay the taxes in full at the time that they are due. If you know that you have not paid your income taxes or you have received a notice of past due taxes from the IRS, it is very important that you contact a tax attorney as soon as possible. The experienced attorneys at Robinson & Henry can work with the IRS on your behalf to try to negotiate options for you, such as:
- Installment Agreements – installment agreements allow you to pay your tax debts in smaller monthly installments over time.
- Temporary Delay – the IRS may determine that your specific situation allows for the option to temporarily delay the collection of your taxes. Note that during this delay period, the IRS will continue to monitor your ability to pay and the IRS may file a tax lien on your property to protect the government’s interest in your assets. A temporary delay will not eliminate your tax liability, but it can give you some breathing room and time to get back on your feet.
- Offer in Compromise – if you qualify for an Offer in Compromise, the IRS may agree to settle your tax liability, including interest and penalties, for less than the full balance due. It should be noted that the IRS will only consider an Offer in Compromise as a last resort option.
Failing to pay income taxes is a serious offense and failure to pay after notice of taxes due from the IRS can be a very costly endeavor. In addition to the penalties that can be imposed for failing the pay, the IRS will begin to add interest to the amount of taxes owed. Tax problems have a way of snowballing out of control so it is vital that you contact a tax attorney as soon as you realize that you have failed to pay your income taxes.
Late Filing of Tax Returns and Late Payment of Taxes
April 15 is the annual deadline for most people to file their federal tax return and pay any taxes that they owe. If you do not file a return and pay your taxes on time, the IRS will charge interest on any unpaid balance and may also impose penalties such as a failure-to-file or failure-to-pay penalty.
Interest on an unpaid tax debt compounds daily from the due date of the return or extension, if the IRS has given you one. The interest rate is the federal short-term interest rate (determined every three months) plus 3 percent.
The failure-to-file penalty is 5.0 percent of the net amount due for each month that your return was late, up to 25 percent. While the failure-to-file penalty will eventually max out, you can still be charged penalties for the balanced on any unpaid taxes.
The failure-to-pay penalty is 0.5 percent of the tax owed for each month that the tax remains unpaid after the due date, up to 25 percent. This penalty rate can increase if you continue to not pay after multiple IRS notices.
In either scenario, the IRS may waive the penalty if you can show reasonable cause for failing to file or pay on time. If you have missed a tax deadline or you feel that the IRS has imposed a penalty in error, it is important that you contact a tax attorney as soon as possible to evaluate your situation and determine the proper course of action.
Income Tax Crimes
Tax fraud is a blanket term for a variety of crimes under the IRS code and the U.S. code. The key component to criminal tax fraud is the taxpayer’s intent to not pay taxes that he or she knows are owed to the government. While proving this intent can be difficult, the government can still pursue civil penalties, i.e., paying money for violating tax laws. Tax evasion can be thought of as a type of tax fraud. Tax evasion generally involves an intentional misrepresentation of income, assets, expenses, etc. on your tax returns.
While tax crimes rarely lead to criminal convictions resulting in jail time, they do happen. If you suspect that you may subject to a criminal tax investigation, it is very important that you contact an attorney immediately. The attorneys at Robinson & Henry have extensive experience in a diverse range of tax matters and criminal defense.
If you are facing a potentially difficult income tax problem, call us at 303-688-0944 as soon as possible to discuss your challenges and consider your options for moving forward. There is always a solution to an IRS problem. Together we will work to bring your situation to a satisfactory conclusion.
Robinson & Henry’s tax lawyers in Denver, Colorado, are a team of award winning attorneys with a diverse background in IRS, federal, and state tax matters. They are powerful advocates for businesses, families, and individuals with employment, income, and various other tax matters.
The tax team regularly collaborates with various attorneys at Robinson & Henry handling bankruptcy, real estate, estate planning, and family law to find unique solutions to complex problems. Because the law firm has over 20 attorneys, multiple insights from various practices areas can be brought to bear on an IRS back tax problem.
About Bill Henry
Bill Henry is the managing partner of Robinson & Henry, and started his career in Washington D.C., in a boutique tax practice advising international and real estate clients concerning various tax matters. He has represented countless clients before the IRS and Colorado Department of Revenue for 941, employment tax, income tax, and other various tax issues.
Bill is a graduate of The George Washington University Law School in Washington, D.C., and is licensed in Colorado, Virginia, New Jersey, Colorado federal court, the U.S. Tax Court, and practices before the Internal Revenue Service and the Colorado Department of Revenue. His clients include consultants, construction and real estate professionals, lawyers, doctors, and many more. Click here for more information.
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