What happens if you miss a tax deadline? How long does it take before the IRS begins its collection action to collect your tax balance? How many fees will you have to pay?

Understanding and managing the nuances of tax law isn’t easy.

Understanding and managing the nuances of tax law isn’t easy. Whether you have failed to file your tax return on time, could not make a payment on time, or you are were assessed penalties by IRS, the best thing you can do is seek the assistance of skilled tax attorney.

The team at Milikowsky Tax Law has years of experience navigating complicated tax matters. If you have questions and need clear advice from tax attorneys who have business experience, and can provide value to resolve your matter, contact the team at Milikowsky Tax Law and access our expert resources for handling these situations.

What To Do After You Miss a Tax Deadline

When you’re running a business, it can be difficult to keep track of all the things you need to do — and when — to keep your company safe and in good legal standing. If you’ve missed the official deadline to file your taxes, you’ll need to speak to the IRS as quickly as possible. There will be a penalty for filing taxes late, but the sooner you address this issue, the better chance you have to minimize the amount of penalties you may owe and the collection action IRS can take (i.e. levies on bank accounts, liens, etc.).” The penalty for failing to file a timely return is generally higher than the penalty for failing to pay the full taxes owed. Thus, once you discover your tax returns have not been filed, you should act quickly to gather your records and work with your accountant or CPA to have the returns prepared and filed.

If you’ve missed a deadline, you probably have a lot of questions swirling in your head: How late can you file your taxes? What kind of consequences can you expect for being behind? Who should you contact first? Don’t panic.

Consequences of Missing a Tax Deadline

As soon as you realize that you’re late in paying your taxes, it’s important to seek help as quickly as possible. If you can pay the money owed quickly enough, you can reduce a lot of stress in dealing with the IRS. Even if you respond promptly, you should prepare to face a penalty for filing taxes late. This may include meeting with a trusted tax attorney and your own financial advisor to plan for the financial effects. Browse our resources below to help you understand what happens if you miss a tax deadline and how it will impact your finances.

What To Do If You Can’t Pay Your Tax Bill On Time

If you realize you cannot pay your taxes in full, you do have options, such as:

  1. Request an installment agreement with IRS or the California State tax agency;
  2. Contact IRS or the California state tax agency to request an extension to full pay the liability (not through a long-term installment agreement because you only need a couple extra months).

If you are having a financial hardship, you may qualify for an Offer in Compromise (“OIC”), which is a request to IRS to settle your tax liability for a lesser amount based on a “Doubt as to Collectibility” or “Doubt as to Liability.” These issues involve intricate tax laws, legal issues, and a thorough analysis of a person’s finances (including preparing a bank account analysis and financial statement). If your business owes taxes, the company’s legal tax issues and financial analysis must also be thoroughly analyzed. The best thing you can do is speak to an experienced tax attorney and develop a custom strategy for resolving your outstanding balance with the IRS.

What Are Back Taxes?

Back taxes arise when your personal or business taxes are not paid in full by the due date. For income tax, payroll tax, and sales tax, these can be quarterly and yearly. Over time, they accrue interest, and can also come with a host of other penalties to consider. If you’re wondering what the penalty for filing taxes late might be, back taxes are a common consequence.

  • Read our overview of what back taxes are and how they affect your business.
  • Check out our guide on back taxes and learn how our team can help you resolve them.
  • Browse our expertise and insights on outstanding tax balances, what you need to know about them, and how you can seek professional guidance.

Resolving Your Tax Debt

No one wants an ongoing tax debt to worry about when they are trying to run a successful business. There are several ways to resolve your tax debt, from agreeing to pay back a portion of the money owed each month (i.e. an offer in compromise), to requesting an extension of time to pay. Even if you owe the IRS more than you can afford to pay, there are solutions available — such as an offer in compromise. The best decision you can make is to start with an experienced tax attorney who understands your business and can offer clear solutions to resolve your tax issue.

Attorney reviews options for handling back taxes
Many people don’t know the options that are available to them when dealing with back taxes and the IRS.  Back taxes are a nightmare for anyone that owes the IRS money without the means of paying it. If you are already in debt, the IRS banging on your door doesn’t help your situation—it just makes it more stressful.  If you owe a lot of back taxes, you don’t have to panic; you have options. Let’s discuss.

First, What Are Back Taxes?

Back taxes are “taxes that have been partially or fully unpaid in the year that they were due. Taxpayers can have unpaid back taxes at the federal, state and/or local levels. Back taxes accumulate interest and penalties on a regular basis.”

Understanding Back Taxes

Back taxes refer to taxes owed from a prior year.  A taxpayer may be behind in paying taxes for intentional or unintentional reasons. Some of these reasons include:
  • Filing a return and failing to pay the tax liability
  • Failing to report all income earned during the tax year
  • Neglecting to file a tax return

What Happens if a Taxpayer Doesn’t Pay Back Taxes?

Unpaid back taxes can be a serious issue for many taxpayers who don’t have the means to pay them.  If a taxpayer does not pay back taxes they owe, they can face a range of consequences from the government. Some strategies the government may use to get a taxpayer to pay back taxes include:
  • Pressing charges
  • Demanding the taxpayer pay immediately 
  • Offer a voluntary disclosure program (to help avoid criminal charges)
  • Offer payment options
If back taxes are not paid, some consequences may include IRS:
  • Seizing property
  • Seizing assets
  • Placing liens on the property
  • Placing a federal tax lien to inform other creditors of the taxing authority’s legal right to a taxpayer’s assets and property.
  • Garnishing a taxpayer’s wages and to levy their financial accounts, seizing up to the total amount of taxes owed. 
Failure to pay taxes can also involve imprisonment. However, if you owe back taxes, you don’t need to panic. Let’s take a look at some of your options. 

What Are Your Options For Handling Back Taxes?

Some solutions our San Diego back tax attorneys can provide include:

A Payment Plan 

Agreeing on a monthly payment amount that is feasible and not strenuous can make all the difference. Our tax lawyer can help facilitate an agreed amount that works for both you and the IRS.

An Offer in Compromise 

An offer in compromise allows you to settle your debt with the IRS for much less than what you owe.

Declaring Non-Collectible

When you declare non-collectible, the IRS immediately stops trying to collect from you for approximately one to two years.

Abatement of Penalties

Through this method, you can seriously reduce the amount you owe the IRS, by reducing the costs of the penalties and interest against you.

Contact Milikowsky Tax Law

If the IRS is telling you to pay your back taxes in a payment plan you can’t afford, contact our San Diego back tax lawyer today. Our legal team at Milikowsky Tax Law is well-versed in tax law procedures and options; we are ready to assist you through this difficult time.  Our committed tax law firm can answer your questions, explain your options, and guide you towards the best game plan for you. At Milikowsky Tax Law we are experts in providing legal counsel for dealing with unpaid taxes.
What to do if IRS Audits your Business

Business owners may not be sure where to start if IRS audits their company. However, an IRS audit doesn’t have to feel stressful or disorganized. In this article, we’ll discuss a set of steps business owners can take if they find out they are being audited by IRS. 

Familiarize Yourself With Common Audit Triggers

The first question many business owners may have when being audited is simply: why is IRS choosing to audit my business? By knowing and understanding common audit triggers, taxpayers can understand how to prevent future audits as well as gain more insight into what caused this audit to occur.

Businesses are more susceptible to an audit if they:

  • Have foreign assets 
  • Have a cash business 
  • Are self-employed 
  • Have a home-based business 
  • Claim a disproportionate number of deductions 
  • File incorrect or incomplete returns 
  • Have a large number of cash transactions 
  • Earn less than $25,000 or more than $500,00
  • File a Schedule C 
  • Claim a vehicle as 100% business expense 
  • File taxes late

Review the Audit Letter Carefully

Take time to fully read the audit letter and consider hiring a professional, such as a tax attorney, to help walk you through it. The letter and accompanying information request packet will notify you as to what entity is being audited (business or personal) what year(s) are under review and who your auditor is. 

*Taxpayers should note that IRS does not send emails or phone messages to notify taxpayers of an audit. These types of communication may be a scammer attempting to retrieve personal information or data.

Understand the Type of Audit IRS is Conducting

IRS defines an audit as “as a review and examination of an organization’s or individual’s accounts and financial information to ensure information is reported correctly according to the tax laws and to verify the reported amount of tax is correct.”

IRS has several different ways of auditing businesses. There are two primary forms of audits: correspondence and field audits.

Correspondence Audits

Correspondence audits are the most common type of audit. This form of audit is generally considered to be easier to navigate than a field audit. Why? A correspondence audit occurs when there are errors on the business owner’s tax returns and IRS identifies these errors.

As a response, IRS sends a letter that describes each of these mistakes in detail. The business owner can respond and correct or explain the error through sending additional information to IRS.

Field Audits

A field audit is more thorough than a correspondence audit. Auditors will visit a business site in person. In this case, the auditor will examine financial records and compare them to the business owner’s return.

Prepare the Paperwork

IRS should list the information it requires in your audit letter. Once you know what information IRS needs, you can collect all of the records and supporting documentation requested (but nothing additional). For example, you may need to submit records such as:

  • Bank statements
  • Receipts from vendors, and businesses you have worked with
  •  Invoices 
  • Pay stubs
  • Payroll records
  • And other information

You can view a list of records IRS may request here.

Answer the Auditor’s Questions

In the case of a correspondence audit, send in the requested documents to correct the error on your tax return or to provide the necessary information to complete it. In the event of a field audit, you will have an interview with an auditor as they visit your business in-person.

In this interview, the auditor will ask questions about your tax return. We suggest being as straightforward and clear as you can. We also advise against volunteering any information or accounting records you are not required to give, including previous years’ tax returns, just to keep the process as simple as possible.

Consider Contacting an Experienced Tax Attorney

The combination of a tight deadline, little to no room for mistakes and potentially severe consequences can be a lot for a taxpayer to handle alone and lead to a poor interaction with IRS. This is why we suggest letting your tax professional do the talking for you.

An experienced tax attorney can help guide you through the process and ensure you are timely, responsive, and compliant. 

Additionally, tax lawyers offer attorney-client privilege, whereas other tax professionals, such as CPAs, do not. Therefore, attorneys are able to speak with your IRS officer on your behalf without risk of subpoena or summons of records discussed. A qualified attorney can review your documents with an expert eye, create the right strategy for you, represent you or your business, and provide valuable advice and guidance. 

Facing an IRS Audit?

If you or someone you know received an audit letter from IRS, reach out to our expert team at Milikowsky Tax Law. We have over a decade of experience working with IRS, tax audits and tax issues. are experts in defending business owners in the face of IRS or other government agency audits.

Is your small business ready for an  audit? We dive into five signs your small business is ready for an IRS audit, here.

Image of a calculator IRS in an audit

IRS audits can be a business owners’ worst nightmare: the hassle, the heaps of paperwork, the potentially hefty bill. However, with the right preparation and resources, an IRS audit doesn’t have to be a stressful event. 

Read on for our ultimate guide to IRS audits. We answer all the most common questions to help you navigate an audit as smoothly as possible. Let’s get started.

What is an IRS Tax Audit?

IRS defines an audit as “as a review and examination of an organization’s or individual’s accounts and financial information to ensure information is reported correctly according to the tax laws and to verify the reported amount of tax is correct.”

How Will You Be Notified of an Audit?

You will know if you are selected for an audit if you receive a verified letter in the mail from IRS. They do not call to notify you about your audit.

Why Was Your Business Selected For an Audit?

There are several different reasons your business may be flagged for IRS audits.

Random Checks

Some businesses are audited in random checks. However, the chances of a random audit are low. Most taxpayers have less than a 1% chance of receiving a random audit check. 

Incorrect Tax Filing Information

IRS runs tax returns through their Discriminant Information Function (DIF) system to track industry benchmarks for each industry and tax bracket. The DIF system also checks for incorrect tax filing information. Any discrepancies in tax forms, or if the form isn’t complete, may trigger an IRS audit.

Other Reasons Businesses May be Audited by IRS

People are more susceptible to an audit if they:

  • Have a home-based business
  • Have a cash business 
  • Have foreign assets 
  • Have large numbers of cash transactions 
  • Claim a disproportionate number of deductions 
  • Are self-employed
  • Issues or transactions with other taxpayers, such as business partners or investors, whose returns were selected for audit

Learn how to avoid IRS red flags from cash transactions, here.

How Long Do You Have to Respond to an IRS Audit?

You have 30 days to reply to the initial audit letter.  

What if You Need More Time to Respond to an IRS Audit?

Your attorney can help by advocating for more time with the IRS agent. We don’t recommend hesitating on responding to an IRS letter on your own, IRS is likely to offer extensions without assistance from an experienced tax attorney who can help present your case.

What Do You Need to Provide in an Audit?

According to IRS, they may ask for copies of:

Receipts

We recommend presenting receipts by date with notes of how they were used by or relate to your business.

Bills

Business owners can include dated bills with information such as the name of the organization that received the payment as well as the type of service it provides.

Canceled checks 

Business owners can organize canceled checks with copies of the bills they paid and any applicable employer reimbursement.

Legal papers 

Include a description of what the case was about, when it happened and how it relates to your business, credit or deduction. Examples include:

  • Divorce settlements including custody agreements
  • Criminal or civil defense papers
  • Property acquisition
  • Tax preparation or advice
  • Loan agreements – Include a copy of the original loan with the following:
    • Names of the borrowers
    • Location of the property
    • Financial institution making the loan
    • Amount borrowed
    • Terms (the number of months to pay)
    • Settlement sheet
    • If the loan was from an institution, include an end of tax year statement indicating interest paid
    • If the loan was not from an institution, provide a statement from the payee indicating the interest paid that year as well as the payee’s address and Social Security number
    • Provide a break-down of how you used the money
  • Logs or diaries
  • Tickets
  • Medical and Dental records
  • Medical savings account statements
  • A copy of a handbook or other statements showing benefit and reimbursement policies
  • Physician statements
  • Capital improvement records for medical purposes including appraisals of the property before and after the improvements
  • Contract for attendant care
  • Theft or loss documents
  • Insurance reports detailing the nature of the loss or damage
  • If not insured, copies of fire department or police reports on the loss, theft or accident
  • Photos or video showing the extent of the damage (if available)
  • Appraisal from a qualified adjustor showing fair market value of the property before and after as well as an estimate of the damage
  • Brief explanation of the loss
  • Employment documents
  • Schedule K-1

You can view a list of records IRS may request here.

How Long Do Audits Take?

The time it takes to conduct an audit depends on the case. It fluctuates depending on:

  • The tax reporting error
  • Communication between the person being audited and IRS officer
  • When and whether the right information is provided to IRS

How Far Back Can IRS Audit Your Return?

IRS audits tax returns from the past three years.  However, audits are typically from the past two years. 

IRS will not look for information older than three years unless they find discrepancies within the audit they are conducting. Most audits do not look for information past six years. In criminal cases, IRS can look back more than nine years.

Facing an IRS Audit?

If you or someone you know received an audit letter from IRS, reach out to our expert team at Milikowsky Tax Law. We have over a decade of experience working with IRS and tax audits and are experts in defending business owners in the face of IRS or other government agency audits.

Read on to learn how to respond to an IRS audit in 2022, here.

Chain Reaction In Business Concept, Businessman Intervening Dominoes Toppling

SAN DIEGO TAX COLLECTIONS ATTORNEYS

WE WILL WORK TO KEEP YOUR BUSINESS IN BUSINESS

At Milikowsky Tax Law, we aggressively fight to defend our clients’ legal rights against tax collections efforts from the IRS and state tax agencies, helping them maintain control of personal and business assets. If you have a severely high tax balance, our San Diego tax lawyers are here to help you understand your options, ward off penalties, and regain financial stability. Our goal is to exceed your expectations in the value we provide.

HOW THE TAX COLLECTION PROCESS WORKS AGAINST BUSINESSES

When your business owes significant taxes, the IRS may refer your case to a local revenue officer, who will contact your office to review financial records. If the officer concludes that your company is able to pay its tax liability, the revenue officer can employ tax collections methods. These could include levying the company’s bank accounts, seizing company assets, and filing liens to protect the government’s interest.

When a business owes either state sales tax or federal / state payroll taxes, individuals can be held personally liable for a portion of the business’ tax liability. If an individual is held responsible for payment, the IRS or California state tax agency can then begin a collection action against the individual. Delinquent payroll taxes can be collected for up to 10 years from the date the tax is assessed. Our San Diego tax collection lawyer can assist.

AGAINST INDIVIDUALS

Upon the conclusion of an audit by the Internal Revenue Service (IRS), the IRS Revenue Agent will issue a 90 Day Letter, also known as the Notice of Deficiency (NOD). The purpose of the NOD is to give a taxpayer a means to contest the IRS proposed assessment before collection proceedings begin. Once an NOD is issued, the taxpayer must file a petition with the U.S. Tax Court within 90 days of the date appearing to preserve their right to contest the deficiency. If the taxpayer does not file a U.S. Tax Court Petition before the 90 day time period expires, the IRS will assess the tax and the tax becomes debt owed to the U.S. government.

The IRS has 60 days after it makes an assessment to give the taxpayer the notice and demand for payment. If the taxpayer fails to pay taxes after a demand for payment is made, the tax becomes a lien on all taxpayer’s real and personal property until the liability is paid.

METHODS OF IRS TAX COLLECTION

There are several methods that the IRS may use in tax collections for back taxes owed by a taxpayer or a company that has been singled out for unpaid taxes. These potentially devastating techniques include:

  • Filing a public tax lien against you
  • Pursuing constructive dividends
  • Garnishing wages
  • Levying, or freezing, bank accounts
  • Seizing a company’s accounts receivable from debtor clients
  • Issuing trust fund recovery penalties
  • Making attempts to close a company’s doors

Whatever problem you face with the IRS, we are prepared to fight for you. We can put our negotiation skills to work in an attempt to lower the taxes and penalties you face. From securing an offer in compromise to setting up an installment agreement, we will find a solution that is right for your situation. Bankruptcy may also be a viable option to consider. Other options that an individual can pursue include filing for innocent spouse relief or proving that you are eligible for “currently not collectible” status.

If your company has serious tax issues, such as a dangerously high tax balance, we are here to help you keep your doors open. Call our San Diego tax law firm for the legal support you deserve!