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Austin Tax Defense Law Blog

A primer of the IRS examination and appeal

If the government believes that your tax returns are errant, they'll let you know. Often, this notice occurs via mail, but, in some circumstances, the IRS may want to conduct an in-person examination. This meeting may occur at your home, place of work, or at the IRS office. During the examination, pertinent financial records may be analyzed to determine what, if any, changes the IRS thinks needs to be made to your tax filing. This, in turn, could significantly increase the amount of taxes you owe.

Although you can certainly agree with the IRS's proposed changes, you also have the right to challenge them. In some cases, fast-tracked resolution methods like mediation can be utilized to settle the matter. This may include the negotiation of an offer in compromise or some sort of custom-tailored installment agreement. If mediation isn't an option, then you'll have 30 days to receive the examination report and file an appeal. If you don't file an appeal within that timeframe, then you'll receive a 90-day notice during which time you can file a claim in tax court.

Get prepared for your audit by the Internal Revenue Service

Taxes are a topic that some people truly hate talking about. They can be stressful, and it can seem like all your hard work results in sending money to the government.

If you're sent a letter that the IRS is going to complete an audit, it's time to take steps to prepare. This is something you may want to include your attorney in, since protecting yourself against the Internal Revenue Service is important.

Appealing an IRS asset seizure

The federal government takes unpaid taxes quite seriously. Luckily, Texans who owe a minimum amount in back taxes can usually work out some sort of installment agreement to settle any owed taxes. Even those who owe a large amount of taxes may be able to make an offer in compromise to settle their debt to the Internal Revenue Service (IRS). However, when individuals do not take action to settle what the IRS believes is owed taxes, then the IRS can take action to seize an individual's property, including their bank accounts, wages, house and other items of personal property.

Fortunately, those who disagree with decisions made by the IRS can pursue an appeal. This includes the decision to seize property. But, in order pursue an IRS appeal, certain steps must be followed.

Independent contractors and Section 530 relief

There are a number of intricacies when it comes to Internal Revenue Service (IRS) tax law. One of the bigger problems that businesses run into is misclassification of employees. While classifying an individual as an independent contractor rather than an employee can save a business on tax withholdings, thereby shifting that burden to the contractor, an improper classification can lead to owed back taxes and significant penalties.

If you're worried about whether workers have been misclassified, then you may want to look at the factors considered by the IRS when determining whether an individual is an employee or an independent contractor. There are three main factors that are considered in this determination, including behavioral control, financial control and the relationship between the parties. Although there is a form that can be utilized to determine how the IRS will classify a worker before making that determination on one's own, there may be relief even if the IRS swoops in, find misclassification has occurred, and levies penalties and back taxes.

What is the non-streamlined installment agreement?

It's never a great feeling to be hit with an unexpected tax bill, especially given the fact that the Internal Revenue Service has powerful collection methods that can wreak havoc on an individual's life. Fortunately, those individuals who owe less than $25,000 in taxes for all years can enter into a streamlined installment agreement. Through this process, the IRS grants an individual up to 72 months to pay off the debt, which is usually broken down into monthly payments. Those with tax liabilities up to $50,000 may qualify for one of these installment agreements, but only if payments are made through direct debit or payroll deduction and there hasn't been a default on a previous installment agreement within the last year. There are a number of other rules and requirements that pertain to streamlined installment agreements.

But what about those who owe more in back taxes? These individuals and businesses may still be able to qualify for a payment plan referred to as a non-streamlined installment agreement. This type of agreement is for those who don't qualify for a streamlined installment agreement and don't want to negotiate an offer in compromise. These non-streamlined agreements last longer than streamlined agreements, meaning that more time can be had to pay back taxes, and they are entirely income based. Additionally, once the collection period runs, the IRS will write off any remaining balance under the agreement.

A quick look at the trust fund recovery penalty

Dealing with accounting and payroll taxes can be a nightmare, primarily thanks to the IRS. It's rules and regulations, as well as IRS tax law, dictate how these matters should be handled, and any misstep, even those that are seemingly minor, can have enormous ramifications. For this reason, businesses, business owners and others who are responsible for handling payroll taxes should think about seeking out legal assistance when accused of mishandling tax-related matters.

This may especially be the case when accused of being subjected to the trust fund recovery penalty. This penalty is imposed upon those who are responsible for withholding or collecting employment and/or income taxes but who fail to do so in accordance with the law. The penalty only comes into play when the party who bears this responsibility willfully fails to live up to it. There is no need for the government to prove intentional wrongdoing, though. In fact, so long as the IRS can show that a party knew or should have known of owed taxes and disregarded the requirement or was indifferent to it, then it can legally impose the trust fund recovery penalty.

Protecting yourself if your spouse or ex made tax mistakes

Getting married often means sharing everything from a last name to a home. You also typically merge your financial accounts and begin to share assets and debts. There are certain benefits to this practice. Especially when it comes to taxes, you and your spouse can likely save money by filing jointly instead of as individuals.

Unfortunately, sharing financial resources and tax filings with your spouse could mean that you wind up implicated in a legally questionable scenario involving the underpayment of taxes or other alleged forms of fraud on your joint tax returns.

What is innocent spouse relief?

Being married has its advantages. Amongst them are several tax benefits that can lessen your obligation to the IRS each year. Yet, there are instances where one spouse's actions or inaction has a significant effect on the family's tax liabilities, which may not arise until after an audit. When a family finds itself strapped with hefty tax liabilities, a spouse who feels like he or she shouldn't be on the hook for tax payments may take action in an attempt to protect themselves.

One step that can be taken is to seek innocent spouse relief. If granted, this type of relief removes all tax liability from an innocent spouse. In order to qualify, though, certain requirements must be met. For example, underreported income and improperly reported deductions and credits must be solely attributable to the other spouse. Additionally, the spouse who seeks relief must show that he or she was unaware of these errors at the time of signing the tax return. The IRS, or the court, must also find that, given all of the facts at hand, finding the innocent spouse liable for the tax liabilities would be unfair.

Don't engage the IRS alone

There are few things as scary in an Austin resident's life as receiving a letter from the Internal Revenue Service. Even before opening the letter, taxpayers imagine the myriad ways in which their life is about to change because of the news contained in the notice. Whether it is to point out a mistake, impose a penalty or declare an audit, taxpayers may end up spending the next couple of months going back and forth with the IRS without ever really understanding what they need to do.

What many do not know is that it is possible to investigate the interest and penalties imposed by the IRS and file abatement requests when necessary. Additionally, levies, garnishments and seizures can also be halted if proceedings are initiated in a timely manner. Lastly, if the facts do not add up, it is also possible to argue a case in tax court.

What is my tax filing status during divorce proceedings?

Austin couples that are newly separated or going through a divorce have enough on their plate without having to worry about how their new marital status will affect their taxes. Navigating these new waters can be tricky, as many have most likely not had to consider these issues previously. It can be complicated from the onset, as couples try to figure out whether they are married.

It seems like a simple enough question-are you married or single? However, the answer is not always straightforward, as IRS rules dictate that one is still married if their divorce is not finalized by December 31 of that year, even if the divorce papers have been filed. Similarly, if the divorce decree was issued on the last day of the year, taxes must be filed as if the person was unmarried the whole year. This does not change even if the couple is living separately-for the IRS, the court decree is the determinant.

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