Fort Lauderdale Back Taxes Lawyer Helping Clients Deal With IRS Issues in Florida
Owing money to the IRS or State can be intimidating and throw your life out of whack, but ignoring your back taxes will only make things worse. It’s important to take immediate action. The IRS has over 148 types of penalties they can assess, and the worst part is they can also charge interest on the original penalties. Penalties can be a high percentage of the total amount owed to the IRS.
What Does the IRS Do if You Owe Back Taxes?
If you have not filed or have not paid your taxes, the IRS can take action to assess penalties and retrieve payment for what you owe. They may seek to collect the amount you owe in taxes in addition to penalties and daily interest. If you have not voluntarily agreed to make payments or entered into a payment arrangement, the IRS can file a lien, levy your property or offset your tax refund.
Initially, if you don’t pay the taxes you owe, you may receive a tax bill from the IRS. This first bill is usually the beginning of the collection process and contains the amount you owe as well as a demand for the balance to be paid in full. Your balance may continue to grow every day due to daily interest accrued, so it is best to take care of it as soon as possible. If you are unable to pay, the IRS may have alternative payment arrangements such as a payment plan or an OIC (Offer in Compromise).
You may also consult a tax attorney to get help and learn your options. Whatever you do, it is best to take action rather than ignore the problem, as the IRS may continue to pursue collection activities on your account for up to 10 years and greatly impact your financial well-being.
What Can I Do If I Owe Back Taxes to the IRS?
If you have past due taxes you need to pay, the best thing to do is to reach out to an attorney who can help you negotiate with the IRS. While you are not required to have an attorney, it may be in your best interest to hire one for this process. The good news is that the IRS offers many avenues to help you take care of your tax bill.
For example, you may request a short-term extension, which gives taxpayers a maximum of 120 days to pay their balance in full. This option allows you to get more time to take care of your tax bill but does not exempt you from late fees and penalties. Alternatively, eligible taxpayers may apply for an extension due to undue hardship, which requires you to prove that paying what you owe will result in financial hardship for you and your household. This puts all collection activity on hold, but your debt does not go away – interest is still applied, and penalties will continue to accrue. Once your financial situation improves, the IRS may again require payment.
You may also be able to pay your tax bill through other means, such as taking out a personal loan from a financial institution or even friends and family or borrowing money from your 401(k) plan if your plan allows it. If you owe the IRS and are unsure what to do, it is best to speak to an attorney to understand your options and learn the best course of action for your situation.
Will the IRS Allow Me to Negotiate My Tax Debt?
In addition to the options explained above, the IRS may also allow taxpayers to enter an installment agreement. If you are unable to pay your balance in full, an installment agreement lets you make monthly payments and may cut your penalty for failure to pay by 50%. The IRS offers many different types of installment agreements based on your income and how much you can pay every month.
The more simple types of agreements include the guaranteed installment agreement and the streamlined installment agreement. The guaranteed installment agreement is for those who owe up to $10,000.00, have filed all their returns, and can pay the total balance within three years or by the collection statute expiration date. To qualify, you must not have had an installment agreement for the past five years. The streamlined installment agreement is for those who owe up to $50,000.00 and can afford to pay their balance within six years or before the collection statute expiration date. It is worth noting that those who owe $25,000.00 or more may be required to set up direct debit payments.
For taxpayers who do not qualify for either of these agreements, other options may be available, but you may need to submit additional documentation so that the IRS can analyze your financial situation and get a clear picture of your ability to make payments. The IRS may file a tax lien when you sign up for the more complicated installment agreements. It may be worth seeing if you can pay off your balance and make it less than $50,000.00 to qualify for a guaranteed or streamlined installment agreement, but when that is not possible, consulting a tax attorney may be in your best interest to choose the right installment agreement and submit the necessary paperwork to be eligible for it.
What Type of Penalties Can Be Applied to My Balance?
The IRS may assess interest and penalties to your balance in addition to the amount of taxes you owe. Interest is typically applied to all late tax payments and it accumulates for every day your balance is not paid in full. The IRS sets its interest rate quarterly, meaning it may change every three months, and it continues to accrue until your balance is paid in full. Besides paying interest on past-due taxes, the IRS may also assess a Failure to Pay penalty if you filed your taxes but did not pay for them. This penalty is usually 0.5% for each month your tax bill goes unpaid and is capped at a maximum of 25% of your balance.
If you did not file your taxes and did not pay your taxes, the IRS may charge a Failure to File penalty, which is usually 5% of the amount you owe added to your balance for every month your bill remains unpaid. The Failure to Pay penalty is also capped at 25% of your balance. In some cases, the IRS may combine both penalties if you have unpaid and unfiled taxes, meaning you may be charged 5% a month, for a hefty maximum of up to 47.5% of your original tax balance. In cases where the IRS determines that the reason for the delay in filing or lack of payment is due to tax fraud, penalties can be multiplied and add up to as much as 75% of the original tax bill.
The bottom line is not paying your taxes and failing to take action to remedy the situation will likely only increase the amount you owe, turning even a small tax bill into a significant headache that may threaten your financial well-being. However, having the right advocate on your side and contacting the IRS to make arrangements to voluntarily take care of your tax bill may allow you to reduce the penalties you owe and keep your issue from getting worse. In some cases, the IRS may even allow for the abatement of the late filing fee if the taxpayer can prove that there was a reasonable cause for their failure to file. Your attorney can also assist you in negotiating with the IRS and finding a way to take care of your tax balance without hurting your ability to support yourself financially.
What Happens If I Have Unpaid or Unfiled Taxes?
If you have unpaid or unfiled taxes (or both) and have not taken any action to remedy the situation voluntarily, the IRS will likely continue to find ways to collect your past-due taxes. If you cannot pay your taxes, it is best to try and work out a solution with the IRS with the help of a tax attorney rather than hope the problem will go away because it will not! Besides adding penalties and interest to your balance, the IRS may resort to a tax lien, or worse – a tax levy – against your property.
A tax lien is a legal claim against your property that essentially notifies your creditors of your tax debt and makes it almost impossible to borrow money or get any type of credit. The lien is not removed until your balance is paid in full. In some cases, the IRS may end up taking more aggressive action and resorting to a tax levy. A tax levy can come in the form of a wage garnishment, bank levy, asset seizure, and even social security levy.
If you earn wages (W-2), the IRS may seize a certain percentage of your regular wages and have your employer subtract it directly from your paycheck to pay your tax bill. A bank levy happens when the IRS requires your bank to put a hold on all your account funds, which will subsequently be seized and applied to your tax balance. When wage garnishments or a bank levy are not effective, the IRS may seize property and sell it to satisfy the tax debt. For those receiving social security checks, the IRS may garnish up to 15% of each payment.
How Can a Back Taxes Lawyer Help Me?
The IRS has 10 years to collect from the date you filed your return, and they will likely continue their collection actions against you, which may include freezing your bank account and seizing the money, or even taking as much as 75% of your paycheck without the requirement of a court order. The best way to deal with unfiled or unpaid back taxes is to get the help of a seasoned tax attorney who can represent you when reaching out to the IRS and help prevent undue headaches, as talking to the IRS without professional representation may do more harm than good for your situation. At the Law Office of Ray Haselman, you can get the help you need to negotiate a favorable resolution with the IRS. Reach out to our Ft. Lauderdale office by calling 786-522-0410 and requesting a free consultation to learn your options.