All of us, no matter which country we live in, pay taxes to our governments in different forms like sales tax, income tax, property tax, etc, but paying taxes is not a smooth process for everyone and a large number of people face problems with regard to taxes or the tax system.

Residents of US are not an exception. They too encounter a number of tax problems and many of them do not know the right way to resolve tax issues. Therefore, here is a guide that focuses on what to do if you have tax problems. But before we explain in detail what to do if you have tax problems, let us first explain what ‘tax’ is.

If you need help with your tax problem, please call us at 407-502-2400, or email us at [email protected].

What is TAX?

Tax is the amount of money imposed upon taxpayers by the state and collected by the government in return for the services and facilities it provides to the citizens and for running the state machinery. There are different ways of imposing taxes upon the citizens. It may be imposed upon people’s income or business profits or as part of the price of a good, service and transaction.

‘Income tax’, the tax that is imposed on a person’s income, is also called as ‘progressive tax’. It means that people who earn more money will pay more tax than people who earn less money. In short, the amount of income tax varies according to the money a person earns, at least theoretically.

‘Sales tax’ is paid on all the items you buy, whether it is a grocery item from the local shop of your area or a new home or car.

The citizens of the US also pay a tax called ‘Social Security’ which is also known as ‘regressive tax’ because of the reason that it reduces with the amount of money you earn. There is an inversely proportional relationship between the amount of money a US citizen earns and the amount he/ she pays for social security.

People often consider tax as a tool that state and the government use to take away citizen’s hard earned wealth. But, if we look at it from the perspective of Human Rights and Economic Justice, there are multiple reasons why taxes are important some of which are:

·       To collect Revenue

State and the government need funds to deliver services to the citizens and that fund is collected through taxes.

·       To Redistribute the money

It is the responsibility of the government to deal with the inequality and poverty within a country and to address that it needs to redistribute money in the society. Taxes that a government collects from rich or well off citizens are also used to overcome poverty.

What is IRS?

Before knowing what to do if you have tax problems, one need to know what IRS is and what the institution is supposed to do. IRS stands for Internal Revenue Service and it is the U.S’ official agency for collecting tax. IRS is also responsible for administration of the Internal Revenue Code passed by the Congress.

Tax Problems

The US is among those countries that have strict tax rules and due to complex tax procedures a large number of people face tax problems in the U.S. Knowing what can lead to tax problems is equally important to knowing what to do if you have a tax problem. Tax problems usually result due to following reasons:

1.     Mistakes in Filing Tax Returns

Every human being makes mistakes and we should not be afraid of making mistakes but mistakes in filing tax returns can create problems for you. Therefore, you need to be very careful while filing your tax return, especially when you do not know what to do if you have tax problems. Following are the some common mistakes people make while filing tax returns:

  • Using the wrong form
  • Writing the wrong Social Security Number or not writing the SSN
  • Wrong name
  • Mistakes in account number
  • Mistakes in calculation
  • Error in filing status
  • Making mistake in figuring deductions or credits       and
  • Not signing the form
  • Typing Errors

The next time you file your tax return, be extra cautious and write down all the details carefully to avoid any tax issues.

2.     Self-Employment

Some self-employed people do not understand the details of the tax imposed upon them or sometimes they simply ignore the taxes they are entitled to pay which can lead to serious tax problems.

3.     Reporting False income

Many people face tax problems because the income that they report in tax return does not match with the information that Internal Revenue Service (IRS) gets from other sources, like your employer, or other people doing the same job.

4.     Not filing Tax return

According to IRS record, more than seven million people in the U.S do not file their tax returns regularly due to which they have to face tax problems.

5.     Do not have proofs of Deductions

Tax problems also arise when you claim deductions in tax but failed to provide proofs for it.

If you need help with your tax problem, please call us at 407-502-2400, or email us at [email protected].

Common Tax Problems

Millions of people in the U.S. face tax problems every year due to various reasons. Most common problems they face are:

  • Audits
  • Penalties
  • Under-reporting Notices
  • Tax identity theft
  • IRS bills
  • Unfiled returns

Although tax problems can be very stressful one should not ignore them because that will only aggravate the problems and not resolve them.

What to do if you have a tax problem?

If you are facing tax problems, do not worry there are large number of people who are facing the same issue in the U.S. Continue to read to know what to do if you have a tax problem.

1.     Investigate and understand your problem

If you have received a notice by the IRS or a penalty has been imposed on you due to tax problems, you need to know what to do if you have tax problem. The first step should be to contact the IRS and investigate your problem in order to know its actual cause so that you can not only take appropriate measures to resolve it but will make sure you do not repeat the mistake again in future.

2.     Act Now

Once you get notified by the Internal Revenue Service about your tax problem do not delay solving it. Act immediately, know what to do if you have tax problem, and send a detailed response or a complete request to the IRS. This will not only ensure that IRS will make a determination keeping in view all your facts but will also make sure that there is no miscommunication between you and IRS.

Also, responding immediately is important to meet the deadlines set by IRS because not meeting deadlines can lead IRS to take a premature decision of your case.

3.     Ask your options for payment program

If you have received a notice from IRS or a heavy penalty has been imposed upon you and you do not know what to do if you have a tax problem and you cannot even pay it off at once, do not freak out! IRS offers a compromise program for those who cannot pay tax debts and/ or penalties at once so, you can ask about their eligibility criteria for that and see if you fit in that. But, even if you are eligible, you need to provide proof that you are not financially stable/ sound and are facing hardships as far as finances are concerned.

4.     Seek Professional Help

If you do not know what to do if you have tax problem or have some doubts, then it is better to go to a professional and take their help rather than asking people around you about what to do if you have tax problem.

Some time tax issues become complicated and get difficult to solve on your own therefore, when you are not sure what to do if you have tax problem? The best option in such a situation is to take help of an accredited professional. Complicated tax problems are best resolved when left to experienced and reputable tax attorney, accountant, enrolled agent or specialist. They will not only properly explain your problem but will also tell you in detail what to do if you have tax problem.

5.     Take extension

Don;t know what to do if you have a tax problem? Then it is better to save yourself from tax problems. If you know that you will not be able to file your tax returns by the deadline, may be due to financial issues or not being able to do all the paper work and calculations required for filing tax return, make sure you file the 4868 form by deadline. This will save you from tax problems and you will get an extension of six months for submitting tax forms. But, do send the taxes that you owe, if any, to the IRS with the request for extension to avoid non-filing or late filing penalties and save yourself from asking what to do if you have tax problems.

What IRS can do if you do not resolve your tax problems?

Tax problems, if not dealt immediately and properly, can create many issues for taxpayers. It does not only affect your finances but will also have a negative impact upon the quality of your life. If you do not know what to do if you have tax problems or delay resolving them then, IRS could take any of the following actions:

  • The Internal Revenue Service can take money from your bank account by seizing it.
  • Your assets can be seized and auctioned by the IRS in order to get money you owe to IRS in terms of taxes
  • Your residence can be seized and auctioned to pay for your taxes. This will take place with the court’s consent.
  • Internal Revenue Service can also send a notice to your employer to seize your salary and other income which will not only make you lose a considerable amount of your earnings but will also let your employer know that you have a tax problem.
  • IRS can also order collection against your retirement accounts, like 401 (k) and others.
  • The IRS can also file a public notice of lien, called Notice of Federal Tax Lien, in favor of the state against all the rights and property you own
  • The Internal Revenue Service can issue an order to your employer, credit union, bank and other third parties to verify your property and assets and can also order you to appear in front of the IRS and give evidence of that.

Ways to resolve Tax problems

There are multiple ways to get your tax problems resolved, so if you do not know what to do if you have a tax problem, continue reading to know your options and select the one best suited to your situation.

·       Pay the Full amount

The first option that anyone who receives a notice from the Internal Revenue Service has is to pay the full amount mentioned on the notice. This is the most appropriate option for those who want to avoid any confrontation with the IRS.

Although people who do not want to get involved in legal matters related to tax issues because they do not know what to do if they have tax problems see this as the most appropriate way, but in reality it is not, because the tax bill that the IRS sends is often inaccurate.

·       Pay the correct tax at once

If you do not have financial constraints and do not know the details of what to do if you have a tax problem, then the best way to get over with your tax problems is to pay the right amount of taxes you are entitled to pay. But you will need to contact IRS for this in order to get the imposed penalty removed. The penalty will only be removed if you provide proof of some genuine cause as IRS does not take into account any request for removing penalty when the reason for not paying the tax was the neglect.

·       Pay in Installments

If you cannot pay the full tax amount at once and are not sure what to do if you have a tax problem, contact a legal advisor and get an installment agreement which would be able to pay more conveniently from the IRS.

·       Get Offer in Compromise

IRC only accepts those requests for OIC or Offer in Compromise where the person’s RCP i.e. Reasonable Collection Potential is equal or less than the amount required for settling the tax problem. Reasonable Collection Potential is determined through tools used for financial analysis i.e. 433 A for individuals and 433 B for business organizations.

Although a large amount of material is available for people who do not know what to do if you have tax problems and professional help is also available, IRS reports reveal that collection and audits by the IRS are increasing and the trend is most likely to continue for years to come. But, keeping in view the stress, financial burden and all the legal work you need to do if you have tax problems it is better to keep them at bay. There can be different types of tax problems, so the most important thing to avoid tax problems is to know, in detail, what the causes of common tax problems are, what to do if you have tax problems, and what could the consequences be if you do not get your tax issues resolved.

If you need help with your tax problem, please call us at 407-502-2400, or email us at [email protected].

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