Failure to file taxes or pay a tax bill has serious consequences. Normally the IRS recommends filing past-due taxes before the end of the next fiscal year, which runs between October 1st and September 30th, to avoid accumulating penalties and interest on amounts owed. However, as more people face salary cuts and unemployment, incomes have become incredibly uncertain, causing most of them to accumulate back taxes. Such individuals may need the help of the best tax lawyer when filing them. They are well-versed in the matter and can make the difference between resolving the problem and escalating it.
What Are Back Taxes?
These are taxes that haven’t been paid or partially paid in the year they are due. Taxpayers may owe back taxes at the federal, state, or local level due to several reasons. For example, the taxpayer may have failed to file returns or report all income earned during the tax year. They also could have neglected filing returns altogether. A penalty of 0.5% of the amount owed applies every month until it reaches 25% or the tax is fully paid. Also, the IRS charges an interest of 3% on the unpaid amount.
Why Enlist the Help of the Best Tax Lawyer?
Depending on the taxpayer’s circumstances, the government can take one of many strategies to deal with back taxes. It can demand the taxpayer pays immediately, press charges, or offer a voluntary disclosure program to avoid criminal charges. That’s where a tax attorney comes into play. This professional has specialized in handling a wide range of tax issues and has the expertise to help the taxpayer in the following ways.
Negotiate a Penalty Relief
Penalties can increase tax debt significantly, making it more difficult to pay back taxes. The best tax lawyer can determine if the taxpayer qualifies for penalty relief and help apply for one. Typically, the IRS grants a penalty relief if they have made an effort to comply with legal requirements. If not, his chances for relief are pretty slim. The attorney applies for a penalty relief based on different circumstances. The most common is reasonable cause. The IRS determines if the reasons provided are reasonable to cause the taxpayer to fail to file a tax return. They include:
- Death, incapacitation, serious illness, or unavoidable absence of the taxpayer
- Natural disaster, fire, casualty, or other disturbances
- Inability to obtain tax records
Apply for a Tax Lien Release
The IRS may place a tax lien against your assets to compel the taxpayer to pay taxes. This means the tax authority gets the first claim over other creditors over their property if they decide to sell it. Tax lien also prevents taxpayers from refinancing the assets to which the liens are attached, and it remains in place until the tax liability is paid off.
Apply for Wage Garnishment Removal
The IRS may also decide to collect the debt by taking a percentage of the taxpayer’s paycheck. The best tax attorney in Chicago may make a case to stop the IRS from garnishing your wages and propose an alternative course of action. For example, they may explain that the action is causing financial hardship. If the IRS decides to stop levying the taxpayer’s wages, it doesn’t mean they are not liable for the tax debt. Declaring hardship only provides more time for the taxpayer to look for ways to repay debt.
Apply for an Offer in Compromise
The best tax lawyer may also opt to make an offer in compromise to the IRS. This is an IRS program to help taxpayers settle tax debt for less than the whole amount. Note that not everybody qualifies for the program. The taxpayer must have a tax debt of at least $15,000, have little equity in assets, and prove they are using their monthly income to pay for living expenses without much left over.
Accumulating tax debt can affect a taxpayer’s financial health and sometimes lead to imprisonment. The best tax lawyers can help you find ways to pay debt without plunging into financial hardship. The IRS’s primary objective is to get you back in the system as a current taxpayer and collect a small amount of the taxes owed.