The Internal Revenue Service (IRS) is responsible for compiling taxes and enforcing tax laws in the United States. While most taxpayers strive to comply with IRS regulations, many common IRS problems can arise. Understanding these common IRS problems can help you avoid them and, if necessary, address them promptly.
Failure to File
Failure to file taxes with the IRS occurs when taxpayers do not return their taxes on or before the due date.
Consequences of Failing to File
- Failing to file taxes on time is usually 5% of the unpaid taxes for each month that the return is late, up to 25%.
- If the return is more than 60 days after the due date, the minimum penalty is either $435 or 100% of the unpaid tax, whichever is less.
- The IRS may file a Substitute for Return (SFR) if you fail to file, which may not include all deductions and credits you are entitled to – resulting in a higher tax liability.
- Your credit score may be negatively impacted – which may affect your ability to obtain loans or credit in the future.
Failure to Pay
Failure to pay taxes owed to the IRS happens when a taxpayer does not pay the full amount of taxes owed on or before the due date.
Consequences of Failing to Pay
- The penalty for failing to pay taxes owed on time is usually 0.5% of the unpaid taxes for each month that the taxes are late, up to a maximum of 25%.
- If you fail to pay taxes owed for more than 10 days after receiving a notice of intent to levy or seize property, the penalty may increase to 1% of the unpaid taxes per month.
- The IRS may file a Notice of Federal Tax Lien against your property to secure payment of the taxes owed.
- The IRS may seize your property, such as bank accounts, wages, or other assets, to satisfy your tax debt.
A tax audit is an examination of a taxpayer’s financial records and tax returns to ensure compliance with tax laws and regulations.
Consequences of Tax Audits
- If the IRS finds discrepancies in your financial records or tax returns, they may assess penalties, interest, and additional taxes owed.
- The IRS may initiate legal action, such as criminal charges for tax evasion or fraud.
- If you find yourself in this circumstance, it is best to cooperate with the audit and provide accurate and thorough information.
Get Help Now
Luckily, there are resources on hand for those with IRS problems. If you are in the El Paso area, you can seek help from one of our tax professionals who can lend their guidance and representation during an IRS investigation. Let us help you navigate your next steps. Contact us online or call (915) 593-3330 to get in contact with a representative.