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Do You Owe the IRS?

Do you have a lot of back taxes that you owe?

I get a lot of questions from clients all the time regarding taxes and things of that nature. So, let me go ahead and start this conversation with some basic information.

Key Points to Remember:

  1. IRS Communication:

  • The IRS will never make a phone call to your house. They won't call you on your cell phone to say that you owe money.

  • If you receive a call that is not from the Internal Revenue Service, it’s likely a scam. The IRS communicates via letters, not phone calls.

  1. State Tax Differences:

  • Every state operates differently when it comes to taxes. Some states may freeze your account or suspend your driver's license if you owe state taxes.

Important Information for Taxpayers:

  1. Owing Under $50,000:

  • If you owe under $50,000, do not take a large sum out of your account to pay it off in one go. Instead, the IRS allows you to make an online payment agreement. As long as you have an agreement on file and are paying the IRS on a monthly basis, they won't take any drastic actions against you.

  1. Owing Over $50,000:

  • Contact the IRS to set up an installment agreement. You’ll need to submit Form 9465 for this. The IRS will allow you to make monthly payments directly from your account.

  1. Handling Large Tax Debts:

  • If you owe a significant amount of money and don’t agree with the penalties, you can submit Form 843 for a Claim for Refund and Request for Abatement. This can often help in waiving penalties, especially if you have a valid reason.

  1. Offer in Compromise:

  • If you owe a substantial amount and can't pay it all, consider filing for an Offer in Compromise. This allows you to settle your tax debt for less than the full amount you owe.

Dealing with Audits and Penalties:

  • The IRS always looks to the source of expenses. If you claim expenses that the IRS can't substantiate, they may disqualify those expenses.

  • The IRS is not going to knock on your door like the CIA or FBI to seize your assets. Ignoring letters from the IRS is the worst thing you can do. Always respond to their queries.

Working with Your Tax Preparer:

  • It's not your tax preparer's fault if you are audited. Audits can happen if the IRS can't substantiate claimed expenses.

  • The IRS operates slowly, often auditing past years rather than the current one.

State Taxes and Business Compliance:

  • Each state operates differently. If you have a business, you must file an annual report with the state, regardless of your income or activity level.

  • Ensure you stay compliant with state regulations to avoid penalties and forfeitures.

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