Neglecting to file and pay payroll taxes is a surefire way to incur serious penalties and debt, and employers may run the risk of federal charges, not to mention the loss of their business. The penalties on late payroll tax filing or payment can increase exponentially in a very short time, and the I.R.S. are especially aggressive in their efforts to collect past due payroll taxes, since they assign higher priority to them than individual income taxes. Payroll tax problems affect more than just the employer; it can mean the breakdown of your entire income, and the livelihood of every other employee in your business.
When the I.R.S. means business, they will seize your assets to settle back taxes, otherwise known as a “bank levy”. The term “bank levy” refers to a freeze on a bank account or the seizure of some or all funds in a bank account, usually due to unpaid taxes or unpaid debt. Bank levies are the result of a creditor or agency attempting to collect an unpaid debt after an extended period of time. In the case of the I.R.S., they will initiate bank levies after repeated attempts to contact and settle with taxpayers, which the taxpayers either ignore, refuse to pay or establish a settlement agreement. The danger of a bank levy is that you risk losing all of the money in your checking and savings accounts, investments, IRAs, accounts receivables, inheritances, social security, pension, insurance policies and anything else you have with equity.
Of all the means the I.R.S. use to collect back taxes, one of the most common forms is Wage Garnishment or a Wage Levy. With this type of forced collection, the I.R.S. instructs the negligent taxpayer’s employer to withhold a certain amount of each paycheck to be put toward the tax debt. No matter how good a relationship you may have with your Orlando tax attorney or employer, chances are that they will obey the I.R.S.’s instructions; if they don’t, they will be held personally accountable for the amount that should have gone to the I.R.S. Wage Garnishment will continue until the tax amount has been collected, plus interest in penalties, or if you settle the entire tax amount in an alternate fashion.
If you have underpaid on your taxes, failed to file returns or pay taxes in a timely manner, you are a prime target for I.R.S. penalties and interest. There are a variety of reasons that taxpayers, who are otherwise conscientious citizens, fall short of the mark when it comes to paying taxes. Studies have shown that taxpayers neglect to file returns in years when there are changes in circumstances. Reasons can also be emotional or financial, if they are unable to pay their tax returns. Sometimes it’s just the result of procrastination.
Getting hit with an I.R.S. audit is stressful, and it’s even more so when the I.R.S. makes an audit recommendation with which you don’t agree. But taxpayers in distress need not panic; these recommendations are not irreversible, and you have a legal right to an I.R.S. appeal. I.R.S. appeals, however, are very involved and are difficult to orchestrate yourself. It is highly recommended that to put a successful I.R.S. appeal into effect, you enlist the help of a qualified tax professional or appeals officer. Their expertise can make all the difference between a favorable appeal and a serious financial setback for you.
An I.R.S. Audit is when the I.R.S. investigates the details of your tax return to determine if it is accurate. The odds that the I.R.S. will select your tax return for audit is relatively low; usually, no more than 2% of individual income taxes are audited, about 1 in every 75. However, about 80% of all people will be audited at least once throughout their tenure as an employee. Most Americans do not have means to attract I.R.S. attention, and the I.R.S lacks enough staff to audit every citizen’s tax return. Depending on income levels and profession, you may or may not be a target for an I.R.S. audit.
Taxpayers with unpaid back taxes that have avoided settling their debt with I.R.S. are prime targets for a Tax Lien. The term “Tax Lien” refers to the I.R.S.’s legal claim on a taxpayer’s property as payment for their debt, and it’s one of the first aggressive steps the I.R.S. takes to collect on back taxes after previous contact has been ignored. If a Tax Lien is also ignored, it will then turn into a Tax Levy.
Most married couples choose to file their taxes jointly in order to take advantage of higher tax breaks. Even if one spouse earns 100% of the income, both spouses are liable for the taxes reported on the return. Therefore, the I.R.S. is able to collect taxes from either spouse, no matter if they earned the money or not, or if they reported the taxes or not. This applies even after couples divorce. Tax fraud is separated into different categories: filling a false return, failing to file a tax return, evasion of payment and tax evasion of assessment taxes.
Regardless of the category, if you are convicted for tax fraud you could face serious jail time and be fined anywhere upwards of $25,000. Regardless of the potential consequences, there are people who choose to deliberately break the law and beat the tax system. They fail to state the correct amount of income earned, overstate deductions and falsify documents. They conceal or transfer income and report personal expenses and business expenses. In these cases, legal and financial consequences are justified and will require a lawyer.
Trust Fund Recovery Penalties are actions taken against the owners, officers, directors, shareholders or other persons with an interest in a corporation with unpaid employment tax liabilities. By enacting a Trust Fund Recovery Penalty, the I.R.S. makes the individuals who run the business personally responsible for the unpaid taxes; if the situation escalates far enough, the I.R.S. can collect from their personal assets.
While no one likes considering the prospect of his or her life ending, it is prudent to protect your assets and minimize tax issues that could arise subsequent to one’s death. While a simple document allocating funds and assets may seem like a viable option, without the proper education about tax and estate planning, your property and funds may become more of a liability than an asset to your loved ones.