How to Handle Unpaid Back Taxes at the State Level

By: Larson Financial

"If you've received a tax liability notice from the IRS you may be a little concerned, with good cause. Chances are the IRS is a lot more informed that you are about the laws and if the notice goes into collections the IRS may try to take your assets in payment. Fortunately, there are options that can help you if you ever find yourself in a tax collection situation.

The first thing you should do is to make sure that you definitely owe the tax. There are some rules about taxes that are important to know such as, you may not be liable for taxes charged against your spouse if you didn't file a joint return with him or her, depending upon Community Property laws in your state. Additionally, the IRS has a ten-year statute of limitations on collections, although there are exceptions that can stop the statute clock. Also, if you have discharged taxes in bankruptcy, the IRS is forbidden from collecting them. Further, it is not automatic that you personally owe taxes assessed against your corporation; IRS must take additional steps to assert those taxes against you.

If you do owe the taxes there are a few ways to handle collection correctly. Above all, maintain good contact with the IRS and save copies of all correspondence you receive and send about the tax liability. The first phase of the collection process after the taxes have been assessed is for the Internal Revenue Service to send a notice requesting payment of the taxes in full. Whether the bill is correct or not, you should contact the IRS to either review your possible options for satisfying the debt or provide the necessary documents to prove the bill is incorrect. Failing to contact the IRS may give the wrong signal and cause you to waive many of your rights. Doing nothing will not make the problem disappear and the collection process will continue with or without your participation.

Second, you should come up with a plan for paying off the tax liability. The IRS representative that contacts you will be interested in getting you to pay off as much as possible in the shortest amount of time. However, you need to ensure that whatever payments you agree to will fit into your financial circumstances rather than agreeing to whatever they offer. Having a plan before being contacted by the representative helps ensure that you pay off the tax on your terms.

Third, make sure you understand your rights as a taxpayer. The Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 98) expanded the rights of taxpayers when dealing with the IRS. Thanks to this act taxpayers now have rights to have a Due Process appeal certain collection actions. The law also created the Collection Due Process (CDP) appeal process as well as the Collection Appeals Program (CAP). These two procedures allow taxpayers the opportunity to be heard during various phases of the collection process and challenge certain collection decisions among other important rights.

All of the bureaucracy of the Internal Revenue Service can be difficult to deal with. If you find yourself in a tax liability collection situation you should consider hiring a professional that knows and understands the law and your rights well. A company such as Larson Financial may be a good investment when it comes to guarding your assets and protecting your income from an IRS collector.

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Larson Financial is a family owned group serving individuals and businesses with tax debt in all 50 states as well as IRS tax issues. Their group of experienced professionals can help you out of tax trouble fast.

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