Maybe you recently received a letter from the IRS about some error in your tax returns. This can be very scary for people who have never had to deal with tax debt. You might be confused as to how to handle this situation on your own. In this article, we will go over whether you can get tax debt relief on your own and how our website can help you.
We would not recommend dealing with the IRS on your own. The IRS should not be taken lightly, even if you are confident in yourself. The changing tax laws and other factors can make it very difficult for someone without the proper know-how. Our team of tax experts and our capable team of lawyers are more than capable of helping you deal with the IRS.
In this article, we’ll go over the reason you would need help dealing with the IRS. As well as the penalties you could face handling the IRS on your own. So, we recommend reading the entire article to get a better grasp of the situation.
Why You Should Not Handle the IRS on Your Own?
When it comes to dealing with the IRS the first problem that you will have is identifying the extent of your tax debt. Depending on what type of tax debt you have you will need to hire a lawyer to represent you accordingly. But without proper training, understanding of what your current debt is you cannot properly represent yourself.
When it comes to being audited by the IRS, you will need to prepare the proper file and record for them. As well as the items mentioned by the IRS. A tax expert can help you prepare and organize the required file. And in case of missing items, they can help you come up with a strategy.
Dealing with the IRS by yourself you may miss a lot of things that someone who has handled taxes for years will notice. Hiring a professional can make the entire process much easier. They can even go over your tax returns to get you any deduction on your taxes that you may have missed.
Handling the IRS on your own is very risky. Once an audit begins there is no turning back, and the last thing you want is for the audit to get bigger than it already is. But hiring a professional allows you to let them represent you to the best of their ability. This decreases any of the risks as these professionals will guide you through the process of the audit.
Dealing with the IRS also involves a great deal of your time. And not everyone has the time to spare, to sit and go through and organize the files. For this very reason hiring a professional can be very
Penalties For Improperly Handling Tax Debt
Mistakes in your tax returns can result in some issues, you may even be charged with tax evasion which is a federal crime. In the circumstances depending on what mistakes, you committed. And whether there was intent to commit tax fraud you will have to face the consequences of your actions. The consequences fall under the Income Tax Act.
Depending on how you handle the situation you may be able to avoid these penalties. For this reason, having a tax expert handle things for you can help you avoid a lot of these penalties. Or at least help you get a lighter sentence. Below we have mentioned some of the penalties for the different forms of tax debt.
Penalties of Tax Evasion
Depending on whether the IRS can prove with evidence that you have committed tax evasion your penalties will vary. If the evidence points to you being unaware, they will give you a lighter penalty as follows:
- You will be required to pay a maximum of 200% of the amount of tax that you undercharged.
- You will be fined a maximum of 5000 USD.
- And you may also be imprisoned for tax evasion for a maximum of 3 years.
On the other hand, if the IRS finds sufficient evidence that you knowingly committed tax evasion, they can charge you fully for the crime. Below we have mentioned the penalties:
- You will be required to pay a maximum of 400% of the amount of tax that you undercharged.
- You will be fined a maximum of 50,000 USD.
- And you may also be imprisoned for tax evasion for a maximum of 5 years.
The IRS may lower your penalties if you are willing to disclose any error you made or omissions. Having a professional review your tax returns will allow you to have a better idea of your errors so that you can gain these benefits.
Consequences of Tax Fraud
Another federal crime that you can be charged with due to mistakes that you can make is Tax Fraud. Tax fraud is claiming false deductions in your taxes. It may be less serious of a crime than tax evasion, but it still has some consequences. An example of a tax fraud penalty that is quite common is the home office deduction penalty.
Home office deduction in your taxes is a great way to reduce tax returns. But you need to keep in mind that you need to use said office for your business activities regularly and exclusively. You may only use the home office for businesses. And you should only use the exact area that you use for working for the deduction.
If the IRS can prove that you falsified your claims for the sake of deductions, you will then have to face consequences for these actions. Below we have mentioned the consequence for these actions:
- This may increase your taxable income.
- If the deduction increases your income under Schedule C that amount will then be taxable under self-employment tax.
Another example of tax fraud may arise from donating to charities. A faulty slip provided by the charity you donated to may result in an audit from the IRS. If these slips do not contain information such as what was donated or the condition of the item, you can be penalized for it.
Besides the slip, your request for a deduction can be denied if the donation you made does not follow the guidelines of the IRS. Below we have mentioned the penalties that you may face:
- Due to the absence of proper info on the slip, you will be denied the deduction and have to pay the additional tax.
- On top of paying the additional tax, you may have to pay an accuracy penalty of 25%.
- And on top of that, you will pay interest on the entire amount.
Penalties Due to Mathematical Errors
Often mathematical errors may take place doing taxes. As a result, you may end up paying the IRS less than what you owe. This may cause some major penalties. Below we have mentioned the penalties
- You will be required to pay the additional taxes as well as the interest from the day it was due till it was returned.
Conclusion
Getting a letter from the IRS can be very scary. And the task of figuring out how you can relieve your tax debt can be very daunting. With this article, we mentioned how difficult it may be to handle the IRS on your own.Thank you for reading the article. Goodbye and Good luck.
