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Austin Tax Defense Law Blog

What does a legitimate letter from the IRS look like?

For the Internal Revenue Service, this is the beginning of correspondence season. It is most likely sending out notices, bills and changes in reporting notices to taxpayers. When an Austin resident receives a letter from the IRS, he or she is likely to get overwhelmed by it and not question the validity of the notice. This is what scammers are counting on and taking advantage of.

In one letter of a disingenuous letter, taxpayers are being threatened by a lien or a levy based on delinquent taxes owed to bogus agencies. Additionally, one version claims a warrant has been issued and an individual will be arrested immediately if the payment is not paid.

Eliminate tax debt with an Offer in Compromise

Sometimes, things happen that make it impossible for you to pay a tax bill. Your savings might be stolen by someone who has infiltrated your bank account, you might lose a job or you could simply not earn enough to save what you need for taxes. Perhaps the money your employer put back was not enough, or you can't pay your tax liability for other issues.

Whatever the reasoning is, the Internal Revenue Service does offer tax debt forgiveness in some cases when you can't pay your tax liability. There are circumstances under which taxpayers can have their tax debts partially forgiven.

Why file tax returns timely

Whether an Austin resident can pay his or her tax bill in full or not, tax returns are due in a timely manner. Unfortunately, if someone is unable to meet their tax liability, they might neglect to file a return and end up facing a number of consequences instituted by the Internal Revenue Service (IRS).

The first step the IRS can take is to file a substitute return on behalf of someone who has not filed timely. However, this return will most likely not give the applicable deductions and entitlements one is supposed to receive. The IRS sends a Notice of Deficiency proposing a tax assessment, after which one has 90 days to either file or petition the tax court.

Alternatives to tax collection?

Previous posts on this Texas blog have mentioned time and again that there are ways to meet one's tax obligations to the Internal Revenue Service (IRS) and even end up paying less than what one owed originally. Options, such as offers in compromise and currently not collectible status, have been discussed as collection alternatives in IRS law. Others are also available, depending on the facts and circumstances of one's situation.

What is innocent spouse relief?

When a married Texas resident files a joint tax return, it means they are both jointly and severally responsible for the ensuing liability. So, not only is it possible to collect the tax liability from the couple, the Internal Revenue Service can also collect it from any one spouse. This is true even if the couple divorces. For example, if one's former spouse did not report their income, then either of the spouses can be liable, unless one can qualify for innocent spouse relief.

If an individual qualifies for it, they can be relieved of their responsibility to pay not only the tax but also the interest and penalties resulting from it. Certain conditions must be met to qualify, such as the filing of a joint return with tax understated due to erroneous items and establishing that the innocent spouse did not know or have reason to know about the understatement of the tax. Erroneous items could be both unreported income and incorrect deductions. For example, the expense being deducted was never incurred or paid or it does not qualify as a deductible expense.

How is my employment status relevant to my tax bill?

Paying taxes is complicated enough, but ensuring one is paying their taxes at the right status of worker can be even more complex. It is a common error made by businesses-intentionally or mistakenly misclassifying the status of a worker only to end up paying heavy penalties. The relationship between an employer and employee is important to understand because it determines which party will withhold taxes and which taxes are going to be withheld.

Texas residents may be aware that the IRS tax law defines an employee or an independent contractor using common law principles. While previously 20 factors were used to determine the status of one's employment, they have been condensed down to three basic elements-behavioral control, financial control and relationship of the parties. This means the IRS looks at issues such as who provides actual directions to the employee, their training, hours of work, order of performance, method of payment, tools and materials used and the right to discharge among other factors.

Failing to report your cryptocurrency could lead to an audit

In many ways, cryptocurrency seems like it shouldn't be something you need to tell people about. After all, the word crypto itself means secret or hidden. Bitcoin and other similar popular digital currencies serve as a way for people to complete international transactions without the risk of fluctuating exchange rates.

Digital currencies also serve important roles in the digital underground and dark web, where people buy and sell items that they don't want the government to know about. However, despite these somewhat questionable roots and uses for cryptocurrency, it has become a popular investing tool since its value began to increase sharply in 2018.

What is 'Currently Not Collectible' status?

Many Texas residents may hesitate from filing their taxes because they are unable to pay their taxes and meet their living expenses at the same time. What most people may not be aware of is that the Internal Revenue Service has various programs that can help taxpayers find a way to defer making payments on their taxes. When facing an overwhelming tax bill, rather than run away from it, it might be beneficial to get more information about IRS Tax Law.

The IRS can place a taxpayer's account in "Currently Not Collectible" status. This means the person can defer making payments on past due income taxes. If the taxpayer can demonstrate that they have little to no money left over after making utility payments and paying for rent and groceries, they may be eligible for the deferment. For people who have been struggling to make ends meet, this option can be beneficial because the IRS will not levy bank accounts, garnish wages or request a payment installment agreement.

You can't avail rights you don't know you have. We can help.

A letter from the Internal Revenue Service can overwhelm most Texas residents, especially when it brings news of an audit or unpaid taxes. Filing one's taxes once is complicated enough. Then to have to justify one's claims or deductions can be frustrating, especially since most people do not know how long to hold on to receipts or which deduction to claim at what time.

Having someone knowledge about the ins and outs of IRS Tax law by one's side when both filing taxes and also when dealing with related tax issues can be very helpful. Ronald A. Stearns is a dedicated taxpayer's advocate who works tirelessly to represent his clients with tax-related issues. Not only does he represent his clients personally, he also helps with a variety of situations, from audits to unfiled tax returns.

Did 2018 tax law changes affect refunds substantially?

Just when Texas residents thought they had a handle on IRS tax laws, the 2018 overhaul of the code took place and threw everyone off their stride. In addition to the Tax Cuts and Jobs Act, the IRS and the Department of Treasury also changed withholding tables to reflect the new law. As the IRS reveals its stats from 2018, it seems as if the average tax refund is not so different from last year. It is only down 2% from a year ago.

Standard deductions have nearly doubled to $12,000 for a single filer and many important itemized deductions have been reduced. Personal exemptions have been eliminated as well. Individual income tax credits have decreased. At the same time, the child tax credit has been doubled to $2,000 per child under the age of 17.

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