Tax Problems

Tax Problems: Information on IRS Problems & Solutions

Upset husband and wife in need of help with tax problems

Every year, millions of Americans face IRS tax problems. You might have unpaid income taxes, unfiled tax returns, mounting penalties, or even be under audit. The good news is that there are tax problems and solutions for nearly every situation. The IRS is often willing to work with taxpayers, and a licensed tax professional can help negotiate the best outcome.

Owing the IRS (Unpaid Taxes & Filing Issues)

Unpaid Taxes

If you owe federal tax or state tax and cannot pay in full, don’t panic. The IRS offers options like:

Paying in full if possible (to stop penalties and interest).
Setting up a payment plan (installment agreement).
Applying for “currently not collectible” status if your financial hardship is severe.

Unfiled Tax Returns

Failing to file tax returns often creates bigger problems than not paying. The IRS can file a Substitute for Return (SFR) on your behalf, which usually leads to a higher tax liability. Penalties for not filing stack quickly, and the statute of limitations on audits doesn’t begin until you file. Even if you can’t pay, always file to avoid unnecessary tax issues.

Tax Penalties & Interest

The IRS charges penalties for both unpaid and unfiled taxes. These penalties can reach 25% of your tax bill, and interest compounds daily. The IRS sometimes removes penalties through abatement programs if you qualify.

Why Do I Owe and How Much?

Confused about why you owe? Common reasons include underpayment of taxable year liabilities, incorrect tax credits, or reporting errors. You can check your balance and transcripts online or by calling the IRS to get answers to your tax questions.

➡️ Need help with IRS tax problems? See our guide on what to do when you can’t pay your taxes in full.

IRS Collections and Enforcement

When you ignore unpaid taxes, the IRS moves into collection mode. These tax problems can quickly affect your property and wages.

Tax Liens

A federal tax lien is the IRS’s legal claim to your property when you owe income taxes. It can hurt your ability to borrow or sell assets. To remove a lien, you typically must pay your balance or set up a qualifying agreement.

Tax Levies

A tax levy is when the IRS seizes your assets. Levies can include:

IRS Wage Garnishment – The IRS takes a portion of your paycheck.
IRS Bank Levy – Funds in your bank account are frozen and seized.
Social Security or other federal benefits can also be levied.

Offsets

Through the Treasury Offset Program, the IRS can take your tax refund or other federal payments to cover back taxes.

➡️ Solutions: Learn how to stop a tax levy or remove a tax lien before the IRS takes action.

IRS Notices & Letters

The IRS sends dozens of notices each tax year, and these letters are often the first sign of trouble. Some common notices include:

CP14: Balance due notice.
CP501 / CP503 / CP504: Collection notices.
LT11: Final notice before levy.
CP2000: Underreporter notice, often related to missing income.

If you receive an IRS notice, don’t ignore it. Many letters give you the right to appeal or respond before further action.

IRS Audits & Examinations

Not all audits mean you did something wrong. But if flagged, you’ll need to provide documents and explanations of your tax return.

Audit basics: Self-employed taxpayers and small business owners are at higher risk.
Red flags: Large charitable deductions, cash-heavy businesses, or unreported income.
Audit reconsideration: If you disagree with the results, you may request a review.

Getting professional help during a tax audit can reduce penalties and protect your rights.

Specialized Tax Problems

Some tax issues don’t fit neatly into the categories above but still create serious stress.

Refund Problems:Lost, delayed, or stolen tax refunds can often be tracked online, but cases of identity theft require more work.
Mistakes on Tax Returns: You can fix errors by amending or superseding your return. The IRS also corrects math mistakes automatically.
Foreign Accounts:FBAR, FIRPTA, and Form 8938 filings carry strict requirements for reporting foreign assets.
Cryptocurrency Tax Issues: The IRS is aggressively pursuing unreported crypto gains. Using the Voluntary Disclosure program can reduce penalties.
Identity Theft: If someone files a return under your Social Security number, act quickly to protect your refund and correct your records.

Serious Legal Issues

In rare but severe cases, tax problems escalate into criminal matters.

Tax Evasion & Criminal Penalties: Willfully hiding income or assets can lead to prosecution.
Tax Court: If you disagree with the IRS and administrative remedies fail, you may file a petition in Tax Court.
Tax Preparer Penalties: Professionals can face penalties if they improperly prepare federal tax returns.

Getting Help

Dealing with help with IRS tax problems can feel overwhelming. But you don’t have to face the IRS alone. Licensed tax professionals — CPAs, Enrolled Agents, and Tax Attorneys — can guide you through the process, whether you need penalty relief, a payment plan, or representation in tax court.

➡️ Get help with tax problems today. Find out if you qualify for free file options, explore your rights under the tax code, and connect with a professional who can help reduce your tax liability.