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.
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.

File tab with focus on savings. Conceptual image for illustration of debt vs savings

SAN DIEGO TAX LIEN LAWYER

UNDERSTANDING TAX LIENS AND HOW THEY IMPACT YOU

Having the IRS knocking at your door and declaring that your property belongs to the government isn’t the ideal situation for anyone. At Milikowsky Tax Law we have represented many tax lien cases and helped our clients keep their property and assets. If you have been issued a lien, do not hesitate to call for help. Our San Diego tax lien attorney explains what you need to know if the IRS has notified you.

WHAT IS THE TAX LIEN PROCESS?

A lien is the government’s legal claim to your property if you do not pay your tax debt. Your personal property, real estate, and financial assets are all subject to government claim. A lien begins when the IRS assesses your liability and sends a Notice and Demand for Payment. If you do not pay the full amount of debt by the date it is due, the IRS will file a Notice of Federal Tax Lien to notify creditors that the government has the legal right to your property and assets.

CAN YOU GET RID OF A LIEN?

The best way to remove a lien is to pay your debt in full. Within 30 days of paying the debt, the IRS will release your lien. As an experienced tax law firm, we know that not everyone is in a position to be able to pay off their debt in full. If you contact our San Diego tax lien lawyer, we can explain to you your various options for reducing the severity of your lien.

You can reduce the impact of a lien through:

  • A discharge of property: This removes the lien from a specific property.
  • Withdrawal: This removes the public Notice of Federal Tax Lien.
  • Subordination: This allows creditors to move ahead of the IRS.

By working with a dedicated and knowledgeable tax and IRS law firm, you can learn more about the options available to you during this difficult and stressful time. Contact Milikowsky Tax Law today and our team can help you navigate the complexities of your legal situation.

OVER A DECADE OF EXPERIENCE RESOLVING TAX MATTERS

When you need legal counsel, do not hesitate to contact our firm. Milikowsky Tax Law was voted one of San Diego’s best tax attorneys and is considered among the top San Diego law firms by the San Diego Business Journal. When you need a tax lawyer, you should never settle for second-best. Our firm is ready to provide you the advocacy you need!

Call our San Diego tax lien attorney today at (858) 227-6931 and request a confidential consultation.