Tax Problems: Information on IRS Problems & Solutions

common tax problems and solutions

Every year millions of people run into trouble with the IRS. You may have unpaid taxes or unfiled returns, you may not be able to afford your tax bill, you may be facing an audit or a garnishment, or you may have received notices from the IRS. Regardless of your tax problem, there is a resolution. The IRS is willing to work with most taxpayers, and a licensed tax professional can help you deal with the IRS and negotiate an agreement. Here’s a look at the most common tax problems. Follow the links to learn more.

Unpaid Taxes

Do you have unpaid taxes? The best option is to pay the balance in full, but if you can’t afford to do that, the IRS has a variety of options. Depending on how much you owe and your current financial situation, you may be able to set up a payment plan or pay less than the total balance. In some cases, you can even get your account labeled as currently not collectible where the IRS temporarily suspends all collection activity.

Tax Lien

When you have unpaid taxes, a tax lien is one of the first significant steps the IRS takes against you. A tax lien is a legal claim to your assets. For instance, if you have a car loan, the lender has a lien against your vehicle. When the IRS files a Notice of Federal Tax Lien, that alerts creditors that the IRS has a legal claim against your property. At this point, the IRS is not taking your property yet. Traditionally, tax liens show up on your credit report, but as of 2018, the three major credit bureaus removed tax liens from consumer credit reports. However, tax liens are still public records. Creditors or others can find out about your tax liens by contacting the IRS Centralized Lien Unit. To remove a tax lien and avoid further collection activity, you should contact the IRS to make arrangements as soon as possible.

Tax Levy

A tax levy is when the IRS starts to seize your assets. A tax levy is one of the agency’s harshest collection methods, and the IRS can take money from your bank account, cars, real estate, and almost anything else of value. Typically, the IRS gives you 30 days' notice before moving forward with a tax levy and provides you a right to a hearing. If you have already received a notice of a tax levy, you need to act quickly to stop the IRS from taking your assets.


IRS Wage Garnishment

A wage garnishment is a form of tax levy where the IRS takes part of your paycheck. All creditors can garnish your paycheck, but the IRS can seize even more of your paycheck than the average creditor. If you are self-employed, the IRS can’t garnish your paycheck, but the agency can contact your clients and take payments they owe you. Ideally, you should contact a tax resolution specialist before the garnishment starts, but in some cases, you can remove an existing garnishment.

IRS Bank Levy

An IRS bank account levy is when the IRS seizures funds directly from your bank account to cover unpaid taxes that you owe. If the IRS contacts your bank, they must freeze your banking assets for 21 days from the day they receive the notice. The bank levy will impact the current funds in the account, not the future funds that are deposited in there, however, they can still issue a future notice to the bank to freeze those assets as well. 

Unfiled Tax Returns

Do you have returns that you have never filed? Unfortunately, the fees and penalties for unfiled returns are much worse than the penalties for unpaid taxes. Even if you can’t pay, you should always file your return. There is a statute of limitations for audits and taxes owed, but in both cases, the clock doesn’t start ticking until you prepare and submit the tax return or the IRS files for you. Additionally, the IRS is much easier on you if you come forward voluntarily. If the IRS has to reach out to you and tell you to file, you may face even more penalties. Luckily, if you don’t have the right documentation or money to pay, a tax specialist can help you file your back taxes.

IRS Offsets

The IRS can seize your tax refund or other federal payments when you owe back taxes. Understand what a notice of Intent to Offset is, how the Treasury offset program works, types of payments that can be reduced by the offset, liabilities subject to offset & more.

Missing, Lost, or Stolen Tax Refunds

For a lot of people, tax refunds are an exciting once-a-year cash bonus, and it can be extremely stressful if your refund gets delayed, lost, or stolen. The IRS has an online tool where you can check the status of your refund. There's also a process for following up on lost refunds, reporting identity theft and refund fraud, and dealing with other refund-related tax issues. 

Tax Penalties

The IRS charges penalties on unfiled tax returns and unpaid taxes. The amount of the tax penalties vary depending on your situation. Luckily, there are ways to get some tax penalties removed, and if you set up a payment plan, the IRS usually reduces the tax penalty for not paying in full on time.

IRS Letters

Getting a letter from the IRS can be scary, especially if you aren’t sure what it means. The IRS sends about 75 different types of notices. Sometimes, the letters inform taxpayers about taxes owed, but they often warn people about upcoming collection activities or about the right to appeal certain decisions. If you aren’t sure what to do, a licensed tax professional or tax relief firm can help you.

Tax Audits

Over your lifetime, it’s likely that you will get audited. The risk increases if you report zero or over $10 million in income, and self-employed people and small business owners generally face audits more often than other taxpayers. If you are currently being audited, a tax specialist can help you. Dealing with tax problems can be scary, expensive, and overwhelming. 

FBAR - Foreign Bank Account Reporting

The IRS requires taxpayers to report foreign bank accounts with a balance over $10,000. It is important to understand the rules about foreign bank account reporting (FBAR). Not reporting your bank accounts can lead to significant penalties. This is a detailed guide on how FBAR works, the requirements to file, handling delinquent FBAR, FBAR penalties, requesting a withholding certificate, and other details to resolve an FBAR problem.

FIRPTA - Foreign Investment in Real Property Act

When you buy real estate from a non-resident alien, you must withhold some of the purchase price and send it to the IRS. This covers the non-resident's tax on the sale. If you don't withhold the funds, you may end up paying their tax bill. This guide covers the different requirements and exceptions to this rule.

Cryptocurrency Tax Guide: Tax implications of Selling, Exchanging, Holding, & Voluntary Disclosure

The IRS is cracking down on cryptocurrency. If you haven't been reporting cryptocurrency gains and losses correctly, you may face serious penalties. Protect yourself by using the IRS's Voluntary Disclosure program and get help from a tax pro experienced with cryptocurrency.

Made a Mistake on Your Tax Return

Mistakes on tax returns happen, they can be fixed with the proper actions. This guide covers handling tax return errors, from identifying the mistake, amending the return, or filing a superseding return. Understand various IRS error notices if they catch an error made and the consequences of not responding. Also, what can you do if the IRS makes an error on your return?

Help With Tax Problems

Dealing with tax problems from the IRS or your state tax agency can be scary and stressful. Luckily, you are not alone, and there is help available. Learn how to find help for IRS tax problems. See if you qualify for free help and learn where to find it. Look at other resources for help with tax problems, and decide on the best approach for your unique tax problem. 


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Find & Evaluate Licensed Tax Professionals to Solve Your Tax Issues

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