Typically, the Internal Revenue Service (IRS) will pursue tax debt through harsh means, such as wage garnishments and property liens. These aggressive methods of recovering tax liability can leave individuals under substantial financial pressure and impact every aspect of their life.
Fortunately, an attorney may be able to leverage government programs and initiatives to grant you some level of relief from this financial burden. Similarly, skilled negotiation and a carefully crafted settlement strategy may be able to further reduce your tax debt or the impact that it is having on your life.
If the IRS has reason to believe you intentionally defrauded and evaded tax payments, you are also at risk of criminal or civil prosecution. An experienced tax attorney will also be a huge asset if you are facing legal proceedings. Without a suitable defense, you could face extortionate fines and even incarceration.
Ronald Arthur Stearns Sr. PLLC.
The tax lawyers at Ronald Arthur Stearns Sr. PLLC have over 25 years of experience successfully helping Texans settle their IRS tax liabilities and gain relief from the overwhelming financial pressure they are under.
We will use our extensive experience to protect your property and assets from seizure and ensure we find the best solution for you and your business. It is possible to negotiate with the IRS, but this must be done skillfully and in accordance with the required procedures and processes.
To discuss your tax resolution needs and the options available to address your IRS problems, contact Ronald Arthur Stearns Sr. PLLC today. Call our team at 210-853-2135 or email to book an initial consultation.
IRS Tax Audits
You may be subject to an audit by the Internal Revenue Service (IRS) if they suspect that your tax calculations have been incorrect, that you are violating tax laws, or simply by random selection. In addition to investigating suspicions of unpaid taxes, the IRS selects businesses and individuals at random to conduct an audit. Generally, an audit should be undertaken by the IRS within three years of when the tax return was filed.
There are three main types of IRS audits that you could be subject to. A correspondence audit, where the process is complete through the mail; an office audit, where you will attend an IRS office; or a field audit, where an agent will come to you. Typically, you will need to provide all of your paperwork and supporting evidence associated with your tax return. This may include receipts and details of expenses, bank account statements, and previous tax returns. It is important to provide the information in the specific format requested by the IRS to avoid complications.
An audit will closely scrutinize almost every detail of your finances. It is advisable to seek legal advice and hire a tax attorney if you are the subject of an audit. Although this is not a legal obligation, legal representation will likely increase your chances of a smooth audit process and favorable outcome.
It is possible for the IRS to be aggressive in its efforts to determine tax liabilities and potentially make a mistake in an audit. Although you have the right to appeal an audit, having an attorney by your side during the process decreases the likelihood of an error or unfair outcome and the subsequent headache of the appeals process.
Possible Outcomes Of An IRS Tax Audit
Several issues could mean that you have paid less tax than you should have, such as an incorrect tax calculation, errors in your tax return paperwork, or complications with numerous sources of income.
Unfortunately, even innocent mistakes can mean you end up with a large bill for back taxes and potential penalties on top. If you are found owing tax to the IRS, an audit may also result in an audit penalty, which can be up to 20% or even up to 75% of the tax you owe, in addition to your original debt.
If an audit raises suspicion of criminal intent, this could lead to an investigation, court case and prosecution, further fines, and possible jail time.
Additional Taxes
Depending on the outcome of your audit, you may have to pay back money to the IRS through various methods. If the audit finds that you miscalculated your tax and have underpaid, you may pay this back through increases to your tax liability the following year.
Alternatively, you may have the option to pay your back taxes and any additional fines in a lump sum. However, this can be financially challenging for many people as tax debt is often substantial and can go back many years.
What If I Can’t Afford The Additional Taxes?
If you have received additional taxes or a large tax bill as the outcome of your audit, this can raise severe financial concerns. With the help of an IRS tax attorney, you may be able to access several options to appeal the decision or reduce the financial hardship of your new tax debt.
Appeals
It is possible that you will not agree with the outcome of an IRS audit and the charges or changes they have established. In this situation, you have the right to appeal the IRS’ findings. If you do not appeal the outcome of your audit within 90 days, you are essentially accepting the fines and admitting your guilt. If you disagree with the audit but choose not to file an appeal, you could be subject to hefty fines and a large tax debt that you may not deserve.
To start an appeal, you must reply to the IRS with a letter of protest, stating that you disagree with the calculations and findings of the audit. Alternatively, your attorney can file an appeal with the tax court. If you pursue an appeal, you will need a strong case backed by supporting evidence to increase your chances of a successful outcome.
The IRS Hardship Program
If you qualify for the IRS Hardship Program, you are awarded ‘currently not collectible’ status. This means that the IRS will not employ harsh methods of tax debt recovery against you, such as garnishing your wages or seizing your property.
To qualify for the hardship program, you must prove that you do not currently have the financial means to repay your tax debt while maintaining a basic, reasonable standard of living and paying living expenses. This will include providing evidence of your current income alongside proof of living expenses for you and your dependents, such as food, clothing, school costs, credit card bills, medical costs, utilities, and transportation.
The hardship program does not negate the need to pay your tax debt entirely. Instead, it just prevents the IRS from using harsh methods to recover the balance. You will still be required to repay the tax you owe and could face penalties, such as fines if you miss payments.
It is essential that you provide evidence and supporting documentation to substantiate your current living expenses. Anything that you can’t provide evidence for may be discounted in your application. The most effective way to apply for the hardship program and successfully evidence your financial situation is with the help of a tax lawyer.
Payment Installment Agreement
If the IRS discovers that you owe unpaid taxes, the requirement to pay back the entire debt in full immediately may not be financially possible for your circumstances. If repaying your entire tax bill at once will leave you in financial hardship, an attorney can help you to negotiate an installment agreement or payment plan with the IRS.
If your tax bills total less than $50,000, an installment agreement will allow you to repay smaller amounts of your debt over a longer period of time. The main limitation to these payments is that you must repay the entire balance before the statute of limitations expires. Usually, your installment agreement will also include fines and any interest you have accrued.
Offer In Compromise
An offer in compromise differs from many other methods of managing a tax bill, as it allows individuals to reduce the overall amount of debt they are required to repay. This debt forgiveness program recognizes the sometimes unrealistic and hefty burden of tax payments, aiming to work with individuals to negotiate a total amount and payment plan that is realistic and achievable in their financial situation.
The process of applying for an offer in compromise is similar to that of the hardship program, whereby you must prove your financial situation and living expenses. Once you have provided an accurate picture of your financial situation, the IRS will review your income and expenditure to establish if you are unable to repay your original debt. If successful, the IRS will propose a new, lower total amount for you to pay either as a lump sum or through a payment plan.
Understandably, this is one of the most popular programs available to reduce your tax burden, and many individuals that apply are not accepted for this tax relief. In general, only 50% of applicants are successful at achieving any reduction in their tax bill. The advice of an experienced tax lawyer can be highly beneficial for your chances of acceptance.
Innocent Spouse Relief
Innocent spouse relief may be an option for anyone whose tax debt is a result of their spouse or ex-spouse’s accounting. If your spouse or ex-spouse incorrectly reported income or any other action that led to tax debt under a joint tax return, this could apply to you. This initiative provides tax relief to spouses who are not responsible for the errors and subsequent tax debt.
To be eligible, you will need to prove that it was your spouse who committed the errors on your joint tax return, that you are innocent, and that you have compelling circumstances. You must apply within two years of any debt collection action against you or your spouse.
If you do not fit the standard eligibility criteria, there are special exceptions that may apply to you. Such as if you are liable for the debt due to community property laws, as opposed to filing a joint tax return. Tax attorneys are best placed to help you understand these criteria and how they could apply to your circumstances.
Bankruptcy
Depending on your financial situation, filing for bankruptcy may be an option if you are unable to pay back your tax bill. Filing for bankruptcy does not eliminate your debt, but it can discharge it. This prevents the IRS from recovering debt from you during the bankruptcy process and for six months after it is complete. The bankruptcy process may also protect your wages and bank account from garnishing.
If a federal tax lien has been placed on your property before you file, bankruptcy will not eliminate the lien. If you look to sell your property in the future, you will be required to pay off the lien before you sell.
What Is A Federal Tax Lien?
A federal tax lien is a legal judgment secured against you and your property to recover a debt that you owe to the IRS. This differs from tax debt, which is simply the money that you owe. A lien is a result of a court process and is a legal claim on your property. A lien can be placed against your personal property, real estate, or financial assets.
A federal lien does not mean that your assets will be actively seized. If you make arrangements to pay your tax debt, your assets won’t be seized. Once you have cleared the debt in full, the lien against your property will be removed within 30 days.
If you don’t begin to pay your tax debt when you have a lien against your property, the IRS can levy the property. A tax levy actually seizes and sells the property or assets to recover your tax liabilities.
If you have received a tax lien, you are within your rights to contest this in court. You must file a petition for a Collection Due Process (CDP) hearing within 30 days of receiving the lien to contest it. During this hearing, your legal representation will explain the level of hardship that the proposed lien will cause you and suggest an alternative method to pay your debt.
Statute Of Limitations On Federal Tax Debt
All IRS debt expires or is forgiven after ten years. Any tax debt remaining ten years after the date when it was assessed or the tax return was filed (whichever is later) will be forgiven.
Generally speaking, the IRS will not inform you that the statute of limitations on your debt has expired and that you are no longer required to pay the remaining balance. However, it can be challenging to calculate this exact date on your own. The statute timer can be paused for several reasons, including periods of time when the IRS is not able to collect money from you.
Processes such as filing for bankruptcy or a collection due process hearing will pause the countdown on the statute of limitations on your debt. While these processes are ongoing, the remaining time until debt forgiveness is not decreasing. Seeking legal advice from an IRS tax lawyer will be the most efficient and accurate way of correctly identifying the statute of limitations expiry for your debts.
What Happens If The IRS Suspects Tax Fraud After An Audit?
The IRS will not typically seek prosecution if your underpayment of tax is obviously attributable to an innocent mistake. However, if you are suspected of violating the tax code or tax law, you can be investigated and face prosecution in civil and criminal courts. You may be subject to a criminal or civil investigation if you are suspected of tax avoidance or tax fraud.
Criminal Investigation
The IRS has a specific department established to investigate criminal financial crimes, such as corporate and individual tax fraud, tax evasion, and bankruptcy fraud. Issues in your accounts, such as large deductions, financial losses, international income and holdings, and failure to report passive income, such as investments and stocks, could all trigger an investigation.
You will not be informed if you are under criminal investigation, which means you may have little time to prepare for your case once you have been charged. If you have any suspicion that you are the subject of a criminal tax investigation, seek legal advice as soon as possible. Often, the IRS spends significant time and resources developing complex cases that can be challenging to defend against. The sooner you secure experienced legal representation, the sooner your tax attorney can begin preemptively building a defense to the case against you.
Criminal Penalties
The penalties for criminal tax charges are severe and can significantly impact your life. If you are found guilty of tax evasion in a criminal court, you can face up to $250,000 in fines and one year in prison. If you are convicted of tax fraud, you face up to 5 years behind bars and a fine of up to $250,000. Either conviction will also result in a permanent criminal record.
In both cases, you may also be required to pay any court costs associated with your case. Often, criminal tax cases are complex and lengthy court processes, which means the court costs can be substantial.
Additionally, a criminal conviction does not exclude you from further prosecution in the civil court system. It is possible for an individual to be prosecuted and face penalties from criminal and civil proceedings.
Civil Investigation
The IRS can also pursue a civil fraud case against you. Although this will not result in a criminal conviction, the potential fines in civil fraud cases are significant and can place you in substantial financial hardship.
The burden of proof is lower in civil cases than in securing a conviction in criminal court. As such, this can mean that it is more likely that you will be subject to a finding of guilt and subsequent civil penalties. You can be prosecuted in both civil and criminal court, and a finding of innocence in a criminal case does not necessarily secure a successful outcome in a civil case.
With the help of a skilled attorney, you can fight a civil fraud case against you to potentially avoid the penalties. The IRS must prove that you had fraudulent intent and committed tax fraud through a range of evidence and testimony. An experienced attorney may be able to dispute the evidence, counter the government’s claims against you, and potentially secure a successful outcome with lesser or no penalties.
Civil Penalties
If you are found guilty of tax fraud in civil court, you are subject to hefty fines. A civil judgment can carry a fine of up to 75% of the total amount of the taxes you did not pay. This fine is imposed in addition to the requirement to repay the tax debt that you did not pay initially.
Can A Tax Attorney Negotiate With the IRS?
Whether you are under financial hardship from a tax debt or facing a criminal or civil case, legal counsel from a reputable tax attorney can significantly improve your prospects and the likelihood of securing a successful outcome.
An attorney may be able to negotiate a smaller tax settlement, arrange an installment agreement and protect you from losing your assets. Similarly, if you are facing prosecution, a tax lawyer can fight the case against you and negotiate a lesser charge or penalties.
Negotiating Tax Settlements
If you are struggling with tax debt and penalties because of an audit, an attorney may be able to help and improve your financial outlook. Your lawyer can assist you with appealing an audit outcome, applying to debt relief programs, or increasing your likelihood of a successful offer in compromise, which will result in some debt forgiveness.
Additionally, a tax attorney can protect your assets from levies and even have your wage garnishment released if they are causing you financial difficulties. A skilled lawyer will work with you to develop the best tax settlement strategy for your circumstances. Some of the most successful strategies to relieve financial hardship include negotiating an installment agreement with the IRS that allows you to wait out the statute of limitations. Once the ten-year limit has expired, the remaining debt can no longer be collected. To secure these types of outcomes, the experience and knowledge of your attorney are crucial. Negotiating with the IRS is no easy task, and you will need an attorney with skill and strategy.
Although rare, in some instances, an attorney may be able to negotiate with the IRS to have your tax debt forgiven, especially if you are in financial difficulty. There is a range of debt relief programs and initiatives that your lawyer can leverage and build into an overall strategy to reduce your tax settlement.
Negotiating And Defense In Lawsuits
If you are suspected of tax fraud or evasion and facing potential legal action, you will need an experienced attorney to defend you in court. Both criminal and civil cases for tax fraud are meticulously put together by the prosecution and are incredibly difficult to beat without skilled legal representation.
The potential criminal penalties for tax fraud or evasion are severe. A reputable attorney will develop the best possible case to defend you against criminal and civil proceedings. A tax lawyer will always aim to have your charges dropped or secure a verdict of not guilty. If this is not possible, they can negotiate with the prosecution, exploit weaknesses in their case against you and potentially secure lesser penalties.
Contact Ronald Arthur Stearns Sr. PLLC For Help Negotiating Your IRS Tax Burden
The federal government and the IRS are a force to be reckoned with and should not be underestimated. The power and resources at the disposal of the IRS means they aggressively pursue every case of unpaid taxes. Without experienced legal counsel, you are vulnerable to harsh approaches, such as wage garnishments and property seizure, and you could even be at risk of prosecution.
The tax attorneys at Ronald Arthur Stearns Sr. PLLC are skilled negotiators with experience successfully utilizing every available IRS program to improve our clients’ IRS tax problems. There are a range of approaches and alternatives that could be available to you to ease your financial stresses. However, time is of the essence with tax debt. Without swift action, problems can escalate, and your financial situation can worsen. Similarly, some of your rights, such as your right to appeal, will expire, leaving you with no choice but to accept the outcome of an audit.
To discuss the type of tax settlement strategy that may be appropriate for you and how we can negotiate with the IRS on your behalf, contact Ronald Arthur Stearns Sr. PLLC.
Call our team at 210-853-2135 to book a consultation as soon as possible to allow us to intervene with the IRS in a timely and effective manner.