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Austin Tax Defense Law Blog

IRS liens explained

The importance of paying tax obligations on time has been discussed on previous posts here, as have the various partial payment plans offered by the Internal Revenue Service. Even if an Austin resident is not able to pay their taxes, by informing the IRS and working with them to figure out a way to make payments a person can potentially avoid penalties. While many think that the IRS only imposes financial penalties, that is not the case. The IRS can also file a lien against a defaulter's property.

In a document filed with the county clerk's office, a federal tax lien is the government's way of attaching a legal claim against the person's property, both real and personal. A lien is attached only after the taxpayer has been assessed to owe a certain amount and the IRS has demanded it be paid, but the taxpayer has not done so in a timely manner. If property is sold with a lien attached to it, the IRS is paid out of the sale proceeds.

The most audited counties in Texas

The potential for an audit was likely in the back of your mind as you filed your taxes. You carefully keep track of every tax document that arrives in the mail and look over your return for errors. If someone else does your taxes for you, you trust that they’ve taken the same caution to prevent an audit.

New research shows that you’re more likely to receive a tax audit depending on the county you live in. For reference, the national average is 7.7 audits per 1,000 tax return filings. These are the five counties where your taxes are most likely to receive an audit:

Can I take any steps to reduce risks of getting audited?

While many Internal Revenue Service tax audits are conducted randomly, there are certain factors that might trigger audits. When the information on one document does not match the information on the other, such as the income reported does not correspond with the income on a W-2, the chances of getting audited are high. Similarly, if someone's automatic deductions are more than for others in that profession, they are assigned a high Discriminant Inventory Function System Score, and the higher the score, the more likely the audit. Lastly, the more someone earns, the more likely they are to get audited.

There are also some steps Austin residents can take in an attempt to reduce the chances of getting audited. One of the most important tips is to double-check one's math. Correct numbers on the wrong line or incorrect addition can trigger an audit that could have been avoided if reviewed.

Working to resolve IRS tax law issues

It may not come as a surprise to many Texas residents that people across the state have financial problems that prevent from doing certain activities. One matter that should not be avoided though, regardless of what a person's monetary situation is, is filing and paying taxes. As mentioned on previous posts here, there are many options available to people who are unable to pay their taxes on time, and none of those include avoiding filing taxes.

However, some people are not aware that they have certain options, such as partial payments or installments plans. As a result, they willfully either fail to file their taxes or continue to neglect making payments without informing the Internal Revenue Service. As a result, people often end up breaking tax laws and face a penalty that might even amount to more than the actual tax bill.

What do I need to know before my business’ first audit?

Before you owned your own business, tax season came with its complications. Now, with a new company, your taxes likely became even more difficult. There are many pieces to the puzzle, and it can be hard to know if everything is correct when you send it into the IRS.

While some audits are triggered because of an error, there is also the chance that your business will face a random audit. In either case, the idea of facing that first audit can be terrifying. You may be especially nervous if you have never faced any type of audit.

What if you can't pay your taxes?

Federal and state income taxes surprise people every year. Even though Austin residents hear of tax credits, cuts, breaks and refunds, not all of them apply to everyone and many people end up owing a significant amount of money to the Internal Revenue Service. It is important to know that many people are not alone in this situation and there are options available to people to ensure they can pay their taxes without either accumulating a penalty.

First of all, just because a person owes a tax bill, it should not deter that person from filing taxes in a timely manner. A failure to file actually has the highest penalty, which is why it is of the utmost important to file. When filing, people should also calculate how much they owe and how long it will take to pay off the amount. Paying it all off at once is the best option if an individual has the cash available, as the IRS continues to attach late payment penalties until the amount is paid in full.

How long does the IRS have to audit you?

An Internal Revenue Service audit is something most, if not all, Texas residents dread, which is why worrying about it is only natural. People hold on to receipts and other paperwork for ages in fear of one, but how long should a person worry about an audit and hold on to documentation?

Generally, the IRS has around three years after a filing to audit the filer. However, it is important to know that there are certain exceptions to the basic rule that can increase the time limit to six years or more. First, if more than 25 percent of the filer's income has been omitted, then the time limit to audit someone increases to six years. "Omit" is more broad than simply leaving off or neglecting to report income. According to the IRS, it also means reporting that has the same effect as omission.

What are payroll taxes that are due?

Employers have a number of duties that need to be fulfilled in order to run a legal and successful business in Austin. One of these responsibilities is that of collecting, reporting and paying payroll taxes, as required by both federal and state law. Additionally, if the employer is the IRS defined responsible party, the employer might be personally liable for taxes that have not been reported. Even if a payroll service is being used, a person is not relieved of their responsibility to complete their duty in a timely manner correctly.

There are a number of taxes that are included on the payroll. These include: federal and state income taxes that are withheld from the employee and paid to the IRS; FICA taxes that are withheld from employees and matched by employers; and federal and state unemployment taxes. In addition to paying these taxes, either yearly, semi-weekly or monthly, depending on the size of the payroll and legal requirements, these taxes also need to be reported on various IRS forms.

What documents do you need for an IRS audit?

Texas residents may be concerned about getting selected for an audit by the Internal Revenue Service. However, having knowledge about what the process can entail and what a person's rights are in the process can go a long way toward addressing many concerns. First of all, its important to know that an audit does not always mean that there is a problem. It is possible someone is selected for an audit based on a statistical formula. Tax returns are compared against similar tax returns with the help of a computer program. Tax returns can also be selected for an audit if they involve issues with other taxpayers whose audits were selected for audit.

The IRS will provide the selected individuals with a written request for the specific documents that will be needed as proof to support the income, credits or deductions being claimed. All of these documents would have already been used to create the tax returns; they are not new ones. The request will also state how the documents should be presented, and when doing so it is important to ensure they are organized according to year, in order to prevent errors or misunderstandings.

The dangers of tax misconceptions

How common are tax misconceptions in the U.S.? Pretty common, the results of a recent GOBankingRates survey suggest.

The survey results point to many Americans not having the right information about key tax details. For example, of the people polled:

  • 30 percent weren’t able to correctly identify the tax filing deadline for this year (April 15)
  • 68 percent didn’t know that you can still accrue late payment penalties when you are on a filing extension
  • Only 14 percent were able to correctly identify the 2018 standard deduction for single filers ($12,000)
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