Income Tax Problems

One of the many taxes that a taxpayer pays the government is income tax or tax levied on the income of a person or a business. However, because not all taxpayers, whether negligently or intentionally, can comply with the obligation to pay correct tax on income on time, income tax problems may arise.

Causes 

There are several reasons that cause income tax problems. First, a taxpayer may face IRS proceedings because of failure to file an income tax return for the present and/or previous years. Second, such problems may also occur when although the taxpayer has filed a return, the stated income or the items such as deductions included therein are false or fraudulent. Third, although a taxpayer has filed a correct return, non-payment of income taxes may also result in taxation controversies.

Avoiding Income Tax Problems 

The 15th of April of every tax year is one of the most dreaded dates by taxpayers because failure to file a return or error in a return may lead to income tax problems. The best remedy to such problems is to prevent them before they happen. Hence, a good course of action by a taxpayer is to take preventive measures such as by seeking professional help in filing, auditing and examination of returns to ensure that the taxable items, exemptions and deductions specified therein are accurate.

Another approach is tax planning, wherein lawful remedies are taken to reduce the amount of taxes. Among these are reducing gross income by availing of tax adjustments, increasing withholding taxes, availing of tax deductions and taking advantage of tax refunds and tax credits.

Keeping tax issues at bay will most definitely the taxpayer save time, effort and money.

Reasons to Avoid Income Tax Problems 

Income tax problems are not helpful to an individual taxpayer, who instead of concentrating on his or her career would be placed under pressure like finding sources for the unpaid taxes or keeping the family intact amidst the crisis. Neither is it helpful to a business, which instead of focusing on management and administration may stray its focus on finding solutions to the tax controversy.

The IRS also does not lightly take violations and can be aggressive in settling the dispute. It can put a taxpayer under stress and is not likely to be expected to be patient with the personal reasons of taxpayers for their inability to settle taxes. In fact, the collection remedies the agency may use in IRS tax problems may use may make it difficult for an individual taxpayer to spend for living expenses and may result in a firm going out of business.

Solving Income Tax Problems 

To solve a tax problem, a taxpayer may undertake self-help remedies though professional help is more beneficial. The first step must be to analyze a taxpayer's financial information, compare it with the return filed and examine tax debts. Then, a legal theory must be built to justify the application of tax reliefs by the taxpayer such as innocent spouse relief, offer in compromise settlement, payment plan negotiation and tax amnesty. IRS collection remedies such as abatement, levy, garnishment, tax lien and distraint may also be availed of to preserve from execution, the taxpayer's wages, properties and other valuable assets.