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Federal income tax significant events, Part 1 – Birth

Major life events can have a significant impact on your annual federal income tax return filed with the Internal Revenue Service (IRS).  This is the first in a series of blogs that will touch on some of these major life events and how they can impact your taxes.

A complete explanation of the above points is available on the IRS’s web site.

Birth.  Having a child has an impact on the number of exemptions you can claim on you federal income tax return.  For the 2011 tax year, an exemption allows you to subtract $3,700 from the amount of your taxable income, so each exemption you can claim will reduce the amount of federal income tax you pay each year.

You are allowed exemptions on your federal income tax return in the following circumstances:

  • You are allowed one personal exemption for yourself, as every person has one exemption.
  • If you are filing a return with your spouse, you are allowed one personal exemption for your spouse.
  • You are allowed one personal exemption for each dependent you claim, with the birth of a child adding to your number of dependents.

For example, if you and your spouse are filing a joint federal income tax return and you have two dependent children, you can claim a total of four exemptions on your federal income tax return (i.e., one of you, one for your spouse, and one for each child).  This means you have exemptions worth a total of $14,800 on your federal income tax return (i.e., 4 x $3,700).

Therefore, with the birth of each child, you gain an additional exemption that can be claimed on your federal income tax return, so long as they qualify.  For a child to qualify for you to claim them as an exemption on your federal income tax return, the child must meet all of the following criteria:

  • Relationship.  The child must be your son or daughter (by birth or by adoption), stepchild, foster child, or a descendent of any of them.  Or the child must be your brother, sister, half brother, half sister, stepbrother, stepsister, or a descendent of them.
  • Age.  The child must be under age 19 at the end of the year and younger than you (or younger than your spouse if you are filing a return together), a full-time student under age 24 at the end of 2011 and younger than you (or younger than your spouse if you are filing a return together), or permanently and totally disabled at any time during the year.
  • Residency.  The child must have lived with you for more than half the year.  Remember that each person has only one exemption that can be claimed on only one tax return.  Therefore, if the parents of a child are each filing separate tax returns, only one parent can claim the child on their tax return based on the living circumstances of the child.
  • Support.  The child must have provided less than half their own support.  That is, if your child earns an income, you must pay more than half of the child’s living expenses.
  • Joint return.  The child cannot file a joint federal income tax return for the year.
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IRS and tax preparer registration: Good for taxpayers

As of the 2011 tax year, the Internal Revenue Service (IRS) now requires that tax preparers who are paid to file tax returns must be certified and registered with the IRS.  The IRS outlines this program on the IRS website.

The IRS is establishing this requirement because too many tax preparers in the past, who advertised themselves as professionals, were in fact lacking in both the training and experience needed to file a tax return that was accurate and complete.  Many of these tax preparers were simply uninformed about the appropriate way to calculate tax returns and complete the filing process, but some were outright filing returns in a fraudulent manner (or simply failing to file returns, even though they were telling their clients the returns had been filed).  As a result, many taxpayers were left paying the penalty, literally, as the taxpayers had to deal with the fines and penalties handed down by the IRS because of the improperly filed tax returns.

This registration requirement applies to tax preparers whether they are filing tax returns for individuals or businesses.  This requirement primarily affects individual tax preparers who do not already hold a certification related to tax matters.  Certified Public Accountant (CPA) and tax lawyers are exempt from this registration process, as the IRS deemed that the respective professional organizations of these individuals were already holding these individuals to an appropriate standard, in part because they must complete continuing education courses that keep the individuals apprised of current tax laws and filing requirements.  In addition, the registration process only applies to people who charge for their services.  This means that volunteers who prepare returns for the elderly or others who cannot afford to pay for tax preparation services do not have to adhere to the registration process.

To become a registered tax preparer, an individual must pass a certification exam, pay a filing fee, and adhere to the annual renewal process.  When a tax preparer becomes certified, the IRS assigns that individual a registration number known as a Preparer Tax Identification Number (PTIN).  The PTIN serves two main purposes.  First, the tax preparer must provide their PTIN to the IRS when they file a tax return.  This allows the IRS to track all of the returns prepared by a given tax preparer and monitor those returns for issues, such as a large number of errors or other signs that may be indicative of a lack of knowledge or fraud.  Second, it allows a taxpayer to verify that a tax preparer is registered before they chose to use that tax preparer to file their taxes.  The tax preparer can simply look up the PTIN in a database maintained by the IRS to confirm the tax preparer is registered and in good standing with the IRS.

The PTIN is good for taxpayers for two reasons.  First, it should improve the quality of service taxpayers receive from tax preparers.  The PTIN program increases the minimum standard of training that all tax preparers must adhere to, which should translate to fewer fines and penalties handed out by the IRS to taxpayers for tax returns with mistakes or other problems.  Second, it should reduce the cost of having a professionally prepared tax return.  While some may believe that tax preparers will attempt to pass on the certification costs to their customers, as more and more individuals gain certification as registered tax preparers, the presence of increased competition in the market will ultimately drive down the cost.  Whereas before a taxpayer had to go to a CPA or tax lawyer to have their tax return prepared by a certified individual, there is now a third group of individuals—those with the PTIN designation—who are certified tax preparers.

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IRS audit: Five steps to avoid a tax audit

You are being audited.  Those are four words none of us ever want to hear.  After all, submitting your federal income tax return to the Internal Revenue Service (IRS) can be a lot of work to begin with.  Depending on how complicated your taxes are, simply gathering all the appropriate documentation you need to complete your taxes can be a lot of effort.  And if you actually prepare your return yourself rather than paying a Certified Public Accountant (CPA), tax attorney, or other professional tax preparer to complete your return, then the process is that much more difficult and stressful.  So you certainly want to do everything you can to avoid having to revisit your tax return as a part of an IRS audit.

So is there anything you can do to avoid an IRS audit?  Thankfully, there is… or at least there is a way to minimize the chance of your return being selected for an IRS audit.  As some returns are selected for audit purely at random, there is no way to completely prevent your return from being selected (unless you choose not to file your taxes, which is not a course of action I recommend).  But following are five things that increase the odds of your tax return being audited by the Internal Revenue Service.

  1. Calculation Errors.  Be sure that all of your math calculations are correct.  Simple errors in addition or subtraction can cause your taxes not to foot properly when entered  into the IRS’ computer systems.  Such errors can lead to the Internal Revenue Service reviewing your return in more detail and potentially trigger an audit.
  2. Interest, dividend, and W-2 reporting errors.  Certain statements you receive for use in your tax return, such as those for interest and dividends (e.g., 1099 forms) or wages you earned during the year (e.g. W-2s), have very specific numbers that must be entered from the statements into your tax forms.  And copies of some of these statements are sent to the IRS as well.  Therefore, if you do not enter the numbers correctly, it will raise flags that may result in your return being audited.
  3. Over-abundance of itemized deductions.  If you use itemized deductions rather that the standard deduction, and especially if your itemized deductions are exceedingly high for your income level, the IRS is more likely to select your return for an audit.  Therefore, be sure your itemized deductions are accurate and you have the documentation necessary to support them.
  4. Incomplete return.  The Internal Revenue Service has specific forms they want a taxpayer to complete based on the type of return being filed.  If you do not include the correct forms with your return or you do not complete the forms fully, it can trigger an IRS audit of your tax return.
  5. IRS knowledge about your inappropriate tax items.  Remember that the Internal Revenue Service pays bounties to people who turn in others who have not paid their appropriate amount of tax.  Therefore, if you brag to your friends on Facebook, MySpace, Twitter, or other social media sites about how you cheated the IRS, know that you may be turned in by your “friends.”

In summary, you should make every effort to submit an accurate and complete tax return, which will put you in the best possible position to minimize the chance of having your return audit while being able to defend your tax return should an IRS audit arise.

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Federal income tax and asset protection

If you owe money to the Internal Revenue Service (IRS) related to unpaid federal income tax, you have likely experienced an escalating series of attempts by the IRS to collect that unpaid money.  The taxes we pay to the IRS are used in large part to fund the federal government of the United States.  If federal income tax is not paid or collected, the government simply will not have the funding needed to function.  Therefore, the IRS has been given powerful authority to seek and collect payment of unpaid federal income tax.

If you do not willingly pay the federal income tax you owe or work with the IRS to establish some form of payment plan, the IRS is able to enforce its authority to collect those unpaid taxes through the use of a levy.  A levy is a legal means by which the IRS is able to seize property from a taxpayer.  An IRS levy leaves you little in the way of asset protection, as the IRS can use a levy to seize your wages, checking and savings account balances, cars and trucks, retirement accounts, and real estate.

If you owe money to the IRS and believe they may obtain an IRS levy against your property, what you may be more interested in understanding is asset protection–that is, what assets are protected from an IRS levy?  Following is information about two ways you can establish asset protection against an IRS levy.

Obtain an IRS Exemption

The easiest means of asset protection is through an asset exemption offered by the Internal Revenue Service.  When the IRS exempts an assets from a levy, it means the IRS will not attempt to seize that asset.

The IRS generally exempts assets in two cases.  First, the IRS will not seize assets that are required in order for you to earn an income.  For example, if you are a handyman and you need your truck and tools to perform work, the IRS will likely allows you to keep those assets.

Second, the IRS will not seize assets that have no value.  This may include things that they simply cannot sell or assets that already have a liability attached to them.  For example, if you own a home but your mortgage is for an amount equal to the value of the home, then the IRS likely will not seize your home, because there would be no money left over after funds from the sale are used to pay off the mortgage.

Transfer Ownership

Assets that are transferred to ownership by someone else are not subject to seizure by the Internal Revenue Service, simply because they are no longer your asset.  However, such a transfer must occur well before the IRS levy goes into effect, as any asset transfer after the IRS levy is in place will be reversed by the IRS levy so the IRS can seize the asset.

Even if you transfer an asset to someone else before an IRS levy is enforced against you, if the transfer was purely to try to keep the IRS from seizing the asset, the IRS levy will still give the IRS power to seize the asset.

 

Some people may advise you that you can hide assets from the Internal Revenue Service by not telling the IRS about the assets and placing them in difficult-to-find locations such as offshore accounts.  However, hiding assets from the IRS is technically illegal and can result in serious repercussions if the IRS finds out you have lied to them or otherwise misled them about the assets you own.

Before you take any steps to shield your assets from an IRS levy, you should speak with a tax attorney.

How can I discuss my situation with a tax attorney?

By completing the short form found below, it will allow a tax attorney to contact you to discuss your situation.  The tax attorney will be knowledgeable about the statutes related to Internal Revenue Service tax levies and asset protection and will be able to evaluate your situation in light of these laws.

The conversation you have with the tax attorney will be free of charge, completely confidential, and will not obligate you to anything further.  Therefore, please take advantage of this opportunity to have an initial consultation with a tax attorney about your tax issues.

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Federal income tax return penalties and what to do next

Federal income tax returns are due to the Internal Revenue Service (IRS) each year on or around April 15.  Once you have filed your tax return, it is generally the end of the matter for you.  Your federal income tax return is processed and you do not think about your taxes again until the following year.

But this year for some reason you received a notice from the IRS.  Specifically, the IRS notice indicates that they are charging you a penalty related to your federal income tax return.  Why?  Read on to find out the main reason the IRS may say you owe them money and what you need to do about it.

Once you file your federal income tax return, the IRS will review the return to determine if it appears to be complete and accurate.  If the IRS deems the return is complete and accurate, they will process it.  If the IRS detects some sort of issue, they will send you a notice describing what the issue is and what it means to you.  A list of many notices the IRS may send appears on the IRS’ web site at http://www.irs.gov/individuals/article/0,,id=96199,00.html.

If you receive a notice from the IRS indicating they are charging you a penalty, it is usually because you owe a tax liability to the IRS that you have failed to pay.  Many people do not realize that when you file your federal income tax return, if you owe a tax liability to the IRS, the IRS expects you to pay the tax liability at the time you file.  Even if you file an extension for your tax return, the extension only relates to allowing you more time to file your tax return.  The IRS still expects you to pay your tax liability due on or around April 15.

If you filed your tax return and did not owe a tax liability, yet you still received a notice from the IRS that you now owe them money related to a penalty, it is possible that you made an error on your taxes.  In the process of the IRS reviewing your tax return for completeness and accuracy, if they detect and correct an error, it could mean that you now owe money to them.  And since the IRS detected the issue after the time when you should have paid the balance due, you may not be assessed a penalty.

Whatever the reason for the penalty or money you owe to the IRS, your best option is to get help from a tax attorney.

Obtaining help from a tax attorney

If you need help with your federal income tax, you can the help you need from a tax attorney.  If you complete the short form found below, a tax attorney can review your case free of charge and start giving you direction on how to address the penalty you received from the IRS.  The tax attorney can help you with the completion of any forms or other steps necessary to address the issue.

Any conversations you have with a tax attorney are completely confidential, and the initial consultation does not obligate you to anything further.  Therefore, take advantage of this opportunity today to help minimize the money you owe to the IRS and put the matter behind you.

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Federal income tax have the IRS on your back?

If you owe money on a past tax return to the Internal Revenue Service (the IRS), you have probably found that they are very persistent in hunting you down in an attempt to get their money.  The initial contact from the IRS may simply come in the form of letters and phone calls under the guise of being sure you are aware that you owe them back taxes related to your tax return.  However, as time passes and the IRS continues to either not hear from you at all or not receive the money you owe them, they will realize that the non-payment of the back taxes is not simply an oversight on your part.

As the IRS can in general seek to collect back taxes for up to 10 years from the date when you filed the tax return related to that money, it is very difficult to outlast the IRS.  Before the 10-year statute of limitations runs out, the IRS will generally file a levy against you to take your property, forcing collection of the back tax owed.

However, you do have options to keep the IRS from continuing to harass you.  Here are some solutions you should consider.

Pay the federal income tax you owe.  If you are looking for help with your tax return and back taxes you owe, then odds are that you simply cannot afford to pay the back tax that you owe on your tax return.  Regardless, this point is worth mentioning and evaluating fully to ensure this solution is not an option.

If you do not have the cash available to pay the tax you owe on your tax return, do you have any other assets or property—cars, boats, homes, jewelry, real estate—you could sell for enough money to cover the back tax?  If you do and you have not been willing to sell the property because it has sentimental or other important value to you, remember that selling other property you have may be a viable solution to get the IRS off your back.

Negotiate a settlement with the IRS.  The IRS has options available to help people pay back federal income tax they owe.  One of these options is a payment plan or settlement agreement, which means that you will pay all the tax you owe not as a single lump-sum payment but as a series of payments over time.  This means that you may be able to work out with the IRS a monthly payment you can afford to address the back taxes you owe.

A second option is an offer in compromise.  An offer in compromise is when the IRS agrees to accept less than the full amount of federal income tax you owe.  But before you assume this is the best option for you, simply because it means you will have to pay less money than you thought you would, keep in mind that the IRS does not enter into an offer in compromise with a taxpayer without a good reason.  For the IRS to accept an offer in compromise, they must believe that they are unlikely to ever receive the full payment, because you have no assets or income.  In addition, you must file every past due tax return you have not filed previously.

Declare bankruptcy.  Bankruptcy is an option for addressing money you owe on a past tax return in certain cases.  Specifically, if the back tax is related to the previous three tax years, an amount assessed by the Internal Revenue Service in the past 240 days, or an amount related to an income tax return you never filed, bankruptcy cannot be used to get rid of the back taxes.  This is true whether you use Chapter 7 or Chapter 13 bankruptcy, the two most common types of bankruptcies used by individuals.

Whatever your situation, before you decide one of the above options may be for you in addressing your federal income tax situation, it would be wise to speak with a tax attorney.

Can a tax attorney help me figure out what I should do?

Yes, a tax attorney will be able to help evaluate your back taxes and determine what options is best for your situation.  The tax attorney will have experience working with cases related to past due federal income tax–situations like yours–and will know what to do.

The initial conversation you have with a tax attorney will be free of charge, completely confidential, and not obligate you to anything further.  Therefore, please take this opportunity today to learn what options you have to address your back taxes and get the IRS off your back.

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Income tax attorney selection: four important questions to ask

If you need help with a tax situation, a tax attorney can be one of the best people you can turn to.  A tax attorney will be familiar with tax laws and can have experience in a variety of tax matters, such as income tax, property tax, and tax settlement.  But every tax attorney and law firm is not the same.  How can you be sure to select the right law firm for you?  Asking the following four questions can help you to make the right decision.

What is the name of the tax attorney who will be assigned to my case, their supervisor, and the owner of the firm?  If you are considering a law firm with a number of tax attorneys, it is important to nail the firm down as to which attorney will be working on your case.  A law firm may be able to advertise that they have a broad array of experience in working many different types of tax cases because they do have at least one attorney who specializes in each tax area.  But if the attorney assigned to your case is not one who has experience with the issues you need help with, that broad experience of the law firm as a whole may not give you any direct benefit.

In addition, once you know the attorney who will be assigned to your case, you should also get the names of the attorney’s direct supervisor as well as the owner of the law firm.  In the event your attorney is not responding quickly enough or helping you to your satisfaction, having the names of the attorney’s supervisor and the owner of the firm will give you a place to turn to for help in resolving the matter.

What experience do they have in dealing with and success in addressing my specific tax issue?  As noted above, once you have the name of the attorney assigned to your case, you need to be sure they have experience with your situation.  You should also evaluate their success in handling those types of cases.

For example, if you are meeting with the Internal Revenue Service (IRS) concerning an audit of your federal income tax, your attorney should have experience in meeting with the IRS about an income tax audit; your attorney should not simply be one who is responsible for submitting income tax returns.

Likewise, if you are looking for an attorney to submit an offer in compromise on your behalf to the IRS for your federal income tax, you should find out how many offers in compromise the attorney has submitted, how many were accepted, and what percentage of the original tax owed did those people save.

How much will it cost and how do they structure payment for their services?  It is important to ask about the cost of a firm’s services to be sure you can afford them.  You may be tempted to look for an attorney or law firm that will charge you the least amount of money.  However, with attorneys, as with many other things in life, you sometimes get what you pay for.  You should only consider the amount an attorney charges for their services while considering the experience the attorney brings to the table.  Paying a little more to hire an attorney with the right experience to actually help you will likely be worth the extra cost.

In addition, be sure the attorney does not expect to be paid everything up front.  A significant portion of the work should not be paid until their services are complete, or the attorney should structure the payment so that you pay for services as you use them.

Does the attorney offer guaranteed results?  With attorneys, a guarantee is actually something you do not want.  While you want an attorney with a good track record in handling situations like yours, if an attorney guarantees you results, you should seek a different attorney.  No attorney can or should promise guaranteed results.

How can I get help in finding a tax attorney who can help me?

If you complete the short form found below, a tax attorney who has experience in handling tax issues like yours will get in touch with you.  This initial conversation will be free of charge, completely confidential, and leave you with no additional obligation.  However, if you like what the attorney has to say and believe they can help you, you can then hire the attorney to help you address your tax issue.

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My tax return has been miscalculated by the IRS. What can I do?

When you submit your federal income tax return to the Internal Revenue Service (IRS) each year, obviously the idea is for you to submit an accurate tax return.  Whether you have calculated your federal income tax yourself or hired a tax professional to prepare your tax return—such as a Certified Public Accountant (CPA) or tax attorney—the income and deductions on the tax return should reflect actual events and be supported by various documentation.  This supporting documentation can include your W-2, statements from your bank or mortgage company reflecting interest paid or earned, logs you have maintained of business mileage, contribution forms from charitable organizations, and similar documents.  While you do not have to include this supporting documentation when you file your tax return, it should still be used as the basis for the numbers and other information submitted on your tax return, and you should retain copies of that supporting documentation.

When the IRS receives your federal income tax return, the IRS performs several basic checks and reviews of the information on the return before accepting the return and beginning to process your refund (assuming a refund is due to you).  This review includes the following:

  • Ensuring the names and Social Security Numbers on the tax return match and have not been used on other returns,
  • Ensuring calculations—whether addition or subtraction—are accurate and that the various deductions and exemptions are valid for the taxpayer’s situation for the current tax year, and
  • Ensuring common indicators of fraud are not present.

In addition to the above checks performed before accepting a return in a given tax year, the IRS can perform a more detailed review for audit purposes.  The IRS can review federal income tax returns in detail for up to three years, or for up to six years if the IRS believes a serious mistake has been made on a return, to determine if a formal audit of the return should be conducted.

In either of the above processes, whether the normal review done on all returns or the more detailed review conducted in selecting federal income tax returns for an audit and conducting that audit, the IRS may make changes on your return that may result in you owing more tax.  It is also possible that the IRS will make a mistake when determining your return is not accurate, resulting in a miscalculation of the tax debt you owe.

If the IRS has legitimately miscalculated your tax debt, there are two main causes.  First, it can be a simple error.  Second, it can be because the IRS did not receive sufficient support to allow a deduction, exemption, or other item on your return.  In either case, you should take similar steps to resolve the matter.

Have a tax attorney review your return and any information provided by the IRS as to why they believe your return is not accurate.  If the tax attorney believes the IRS has made a mistake, you should make use of the appeals process for tax disputes.  The appeals process is handled by an independent body from the IRS with the goal of attempting to resolve tax disputes in a fair and unbiased manner.

Additional information about appealing your taxes is available on the IRS web site at http://www.irs.gov/individuals/content/0,,id=98196,00.html .

How can I get help in reviewing my situation and filing an appeal if it is right for me?

If you complete the short form found below, a tax attorney who is knowledgeable about federal income tax returns and the processes for appealing IRS decisions that may be in error will contact you.  The tax attorney can have an initial discuss about your situation free of charge and without further obligation to you, and you can rest assured that nothing you share with the tax attorney will be discussed with anyone else, including the IRS.  Therefore, you should take this opportunity today to get help in determining if an error has been made by the IRS on your tax return and taking the steps to be sure you pay only the minimum tax you can.

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What is an IRS wage levy? How much of my wages can the IRS take?

If you owe money to the Internal Revenue Service (IRS) related to unpaid federal income taxes, you should know that the IRS has the power to seize various assets from you to settle the debt.  Initially, the IRS will simply notify you that you owe them money, and the IRS will encourage you to pay the amount you owe, whether as a lump sum payment or by establishing a payment plan to settle the tax debt.  However, if you do not work with the IRS to identify a way to resolve the debt and you continue to ignore their requests for payment, the IRS can ultimately use a levy to satisfy the debt.

A levy is simply the legal method the IRS has available to them to take your property.  An IRS levy can include most anything you have with value that the IRS can then sell or otherwise liquidate in order to satisfy the debt that you owe.  The levy can include your salary or income as well.  A levy against your wages is often called wage garnishment.

The IRS executes a wage levy by contacting your employer, who then has to withhold a certain portion of your pay to sent to the IRS.  The IRS will provide your employer with a method for calculating the maximum amount that your employer can pay you.  This means that there is technically no limit or cap as to how much of your income the IRS can take.  If you obtain a raise or work overtime, you will not receive the additional money; the IRS will take it.

The amount of your wages the IRS can seize is based on:

  • your filing status (e.g., single, head of household, married filing jointly, or married filing separately),
  • how often you are paid, and
  • how many exemptions you claim on your paycheck.

Depending on your specific situation and how much money you make, an IRS wage levy may mean you no longer take home enough money to pay for the necessities of life or to support your family.

What should I do if the IRS is threatening to garnish my wages?

You should contact a tax attorney to get help in working with the IRS.  Addressing unpaid tax liability and the threat of the IRS taking your wages can be a frightening matter, as well as a difficult situation to resolve if you do not have experience in doing so.  A lawyer who has training and experience in tax matters will be able to review your situation and work with the IRS on your behalf to resolve the tax matter.

If you would like a free consultation with a tax attorney about your tax issues, you can obtain one by completion the short form below.  This consultation is protect by the attorney-client privilege, which means the attorney cannot discuss with the IRS whatever information you share with them, and does not mean you have to hire the attorney to help.  But once you speak with the attorney, if you like what they have to say and how they can help you, you will then have someone on your side who can help you address your tax issues.

Please therefore take this opportunity to try to avoid having the IRS garnish your wages.  Get help today in addressing your tax issues with a tax attorney by your side.

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I paid my taxes late. What interest and penalties can I be charged?

The Internal Revenue Service (IRS) charges various interest amounts and penalties to taxpayers related to the filing of federal income tax returns or the payment of taxes.

Late filing of taxes. The IRS requires that taxpayers file their tax returns each year by April 15 (or technically around April 15, in cases where April 15 falls on a weekend).  If needed, a taxpayer can file an extension with the IRS, which gives the taxpayer six additional months to file their tax returns, or until November 15.  But whether you are filing your tax return on April 15 or November 15, you must file it.  Even if you owe taxes and cannot afford to pay them at the time you file, the IRS still requires that you file your tax return.

If you do not file your tax return on time, the IRS will charge you what is known as a Failure to File penalty.  The Failure to File penalty is charged at the rate of 5% of the tax liability due per month, up to a maximum amount of 25% of the tax liability due after five months.  For example, if you owe $400, 5% of this amount is $20.  This means that after five months, an additional $100 will be added to your tax bill, bringing your total amount owed to $500.

In addition, if you fail to file your tax return for too long, the IRS will file what is known as a substitute return for you.  In all likelihood, the substitute return will result in you owing a larger tax balance than if you file the return on your own, as the IRS will use the standard deduction rather than any itemized deductions you might have been able to use.

Late payment of taxes. The IRS requires that taxpayers pay any tax they owe on April 15 of each year.  Even if a taxpayer files an extension with the IRS so that they do not have to file their return until November 15, the IRS still expects you to pay the tax you owe by April 15.

If you do not pay your tax liability on time, the IRS will charge you what is known as a Failure to Pay penalty.  The Failure to Pay penalty is charged at the rate of .5% of the tax liability due per month, with no maximum amount for this penalty.  Therefore, for example, if you owe $400, .5% of this amount is $2.  This means that after five months, an additional $10 will be added to your tax bill, bringing your total amount owed to $410.

As you can see based on the information and examples above, the IRS considers someone failing to file their tax returns a much more serious matter than someone who files their tax returns but does not pay the tax liability due on time.

In addition to the penalties noted above, the IRS charges interest on the unpaid tax liability.  The interest rate charged by the IRS is based on current interest rates, adjusted every three months.

How can I get help in filing my tax return or addressing my unpaid tax liability?

If you need help with your tax return, a tax attorney can provide you with assistance.  A tax attorney knows the tax laws and will have experience in working with the IRS regarding unfiled tax returns or unpaid taxes due.

You can get help from a tax attorney by completing the short form found below, and a tax attorney will contact you.  The initial discussion with the tax attorney is free of charge, completely confidential, and does not obligate you to anything further.  Therefore, if you need help with your taxes, please take this opportunity today to get the help you need.

Need Help with your Unpaid Taxes?

Complete the Free Tax Case Evaluation form below and an experienced Tax Professional will contact you to discuss your situation. Don't Wait -- Get Help Today!


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