Are you someone who hasn’t filed your taxes with the IRS in several years? Are you scared, stressed, and unsure what to do? Perhaps you haven’t filed for one of the following reasons:
Catastrophic events in your personal life
Death in your family
A failed business
Failed relationships
And now, you’re trapped in a position where you believe that if you come clean with your actions, you’ll get sent to jail. Fortunately, the IRS only prosecutes the most egregious cases of non-filing, and the occasional common person in order to demonstrate a point. (more…)
Choosing between jail time and negotiating with the IRS to reypay back taxes and fines seems like an easy choice. But for many, their fear keeps them from acting and before long the IRS comes calling.
If you have a tax problem, you don’t have to repeat this mistake. Many people don’t realize that you can often negotiate a lower tax bill with the IRS using what is called an IRS Offer In Compromise or OIC. With an IRS offer in compromise, you can lower your overall tax debt and make monthly payments that let you not only avoid jail time, but wage garnishments and IRS levy’s as well.
Here’s an example of what not to do and more on the IRS Offer in Compromise:
In 2011 nearly half of all American tax filers will pay no federal income taxes this year, according to data released by the Tax Policy Center.
For all you taxpayers this is a sobering thought: 76 million tax filers, or 46.4 percent of the total, will be exempt from federal income tax in 2011.
A similar percentage of filers who are mostly among the bottom 40 percent of earners, legally avoided paying federal income tax for the past several years. (more…)
Tax problems typically have a profile and so do the people who create them.
This is the profile of someone who creates a tax problem:
Knowingly or unknowingly violates tax laws.
Poor or no financial planning.
Makes errors on tax return (self, or tax preparer).
Lack of money to pay taxes.
This is the profile of a ‘problem’ tax personality:
Procrastination.
Anxiety.
Fear of the unknown.
Not taking responsibility.
All of the above.
All of these keep the person from taking action to fix their IRS problem so they can get on with their life. They’re “stuck” right where they’re at, and their life will not progress in this area until they take action to seek help with their IRS problem.
When you put the profiles together you get tax problems. For a small number of people, these behaviors and traits seem to completely define them. They complain about anything. Someone else is always at fault. While this extreme is the exception, procrastination is the norm for my clients. I’m proud of my clients because they’ve taken the step in getting professional tax help in dealing with this difficult problem in their life. In that sense they are being very brave.
The fuel of procrastination is the desire to avoid the real or perceived pain of their IRS problem. They also often have a lack of knowledge which causes their fear or anxiety. Some of my clients have gone years worrying about their tax problems before finally picking up the phone and calling me. When they do, many are elated to hear that their tax problems are common, and that there’s a way to fix things with the IRS.
My best advice for dealing with tax problem procrastination is to take one thing at a time.
First step, get educated right? No, not for procrastinators. You just get stuck in an endless loop of passive Internet research. Instead, write down a small goal for today and do it. Make it really simple at first and something you can accomplish on your own. This will get the ball rolling. Something like, ‘write down 5 things I’ll enjoy when I fix my tax problem.’
A good next step is to contact someone who can help. I’d suggest you call because it’s a more active form of action than an email. But, if a call feels daunting then use email. The IRS Tax Advocate is an example of someone you can call. You can also call an experienced tax attorney to take advantage of both their expertise and the protection of attorney-client privilege.
I’m not going to tell you things are easy. Dealing with an IRS case is not fun. When I work with clients I must ask them to give me a lot of financial information and documentation. If they are non-filers, they must begin filing certain tax returns. If they are non-payers, they must begin paying current estimated taxes or correct tax withholdings. But people can deal with this when things are spread out on a monthly payment. Even if the news is not what you want to hear, you’ve taken the first step. And procrastinators know that once you begin anything, it’s easier to take the next step.
For many, their tax problems are far less severe than they have imagined. I can’t tell you how many people have minor tax issues and imagine that they’re going to jail! Don’t do this to yourself. Believe it or not, reality can be your best friend, not the monster we often make it out to be.
I also want to encourage people to see these characteristics for what they are, a series of past behaviors and traits. Current or past behavior need not define us or our future situation. While a character trait like procrastination may be your go-to response under pressure, people have proven just as able to change once they become conscious of their own responses and actions.
I’m not trying to be your new psychologist or motivational coach, but I am saying that I’ve seen people turn their financial situation around completely once they found the courage to act.
For my clients it’s about fixing their tax problems. And the major cause of that change wasn’t a tax lawyer like me, but an individual just like you.
Until next time,
Jeffrey I. Fouts, Tax Attorney You can put off your tax problem, or put us to work.
Here’s a bio of sorts. I’m happily married with two kids. I’m a real small town tax lawyer (Ellijay, pop. 1,584) not some fictional marketing character. I’ve represented tax clients against the IRS in all 50 states, and in 21 foreign countries. I have 18 years experience, thousands of satisfied clients, about 8 critics at last count, and an A+ BBB Rating.
I’m a member in good standing of the bar and have active memberships in courts from Georgia to Washington D.C., including the U.S. Supreme Court. My competitors covet my Google ranking but my clients covet my sound legal counsel. I deal directly with my clients and have a small, tireless staff. You can put off your tax problem, or put us to work.
The IRS is Dramatically expanding its efforts to unearth unreported offshore income, and prosecute offenders who try to hide money in international bank accounts in order to avoid paying income taxes.
Federal tax authorities are looking to force HSBC India to reveal the names of 9,000 U.S. taxpayers of Indian descent. They have reason to believe that there are thousands of bank accounts with unreported income of $100,000 or more generated by U.S. residents. This income is taxable under the current IRS codes.
The IRS is in a multi-year campaign against undeclared offshore accounts held by U.S. taxpayers, previously focused on accounts held by banks in Switzerland, including UBS AG.
UBS admitted two years ago it had plotted to defraud the U.S. government by helping wealthy Americans hide their assets in swiss bank accounts. UBS paid $780 million to avoid criminal prosecution and turned over 4,000 names.
If you are considering depositing money in an offshore bank account, check with your attorney or CPA first to make sure you aren’t breaking federal law. We see many cases involving hidden bank accounts, and can help you if the IRS is auditing your complex financial transactions.
Ever wonder how wealthy people pay so few in income taxes? Here are some ways that wealthy individuals lower, or in some cases eliminate their federal tax bills.
The true effective rate for the super wealthy is actually much lower than that indicated by official statistics. Those figures fail to include the additional income generated by many sophisticated tax-avoidance strategies used by high net worth individuals.
Using tax deferred strategies such as purchasing large community properties, paying yourself in dividends, or claiming deferred income can save multi-millionaires huge sums of money, and allow them to continue to accumulate massive riches.
Be careful when using sophisticated tax reduction strategies, as the IRS can come after you for unpaid taxes if you improperly claim deductions and tax breaks..
Have you ever tried to reason with a someone who is emotionally convinced they are right? No amount of logic or evidence can convince them they might be wrong. They remain firmly entrenched in their beliefs.
Some good folks believe that the IRS may be unconstitutional. But it doesn’t matter that they may be incorrect in their views. They’re convinced they are right and it is very difficult to convince them to the contrary.
Even Idaho’s Republican lawmaker Phil Hart believes the IRS is unconstitutional. As a result, he stopped paying his taxes to protest the IRS. Not surprisingly, the IRS wasn’t convinced by his position and they slapped a $300,000 tax lien on him. One would hope that an elected US government official would choose a different method to express his feelings than stop paying taxes, increasing the tax burden on his constituents.
Apparently Mr. Hart felt that it was alright for the people who elected him to pay his salary, benefits and social programs and he should not contribute. (Read the article at KHQ.com)
What’s the lesson here? Taxpayers are free to believe that the IRS and the current system of taxation is unconstitutional, but believing that doesn’t make the IRS go away. The best way to change a system is to work to change the system using legal means, not by breaking the law, or causing the government to come after you.
It doesn’t help you, or change the tax laws, if you damage your financial life by having the IRS come collecting.
If you owe back taxes, you should strongly consider dealing with the IRS – sooner rather than later.
[Image source: Phil Hart Constitutional Income Book]
Although he was making music long before, Ruben Studdard’s win during the second season of American Idol (in spring 2003) made him a star. He later won a Grammy award and is billed as being a pop, R&B, and gospel singer.
His music has solidly performed, even if he himself has not recorded a lot of chart-toppers since American Idol. He still remains one of the better-known winners of the hit show, although the runner up from that season (Clay Aiken) occasionally overshadows Studdard.
Ruben Studdard tax problems
As the winner of American Idol, he won a one million dollar recording contract, one of the key elements in his rise to fame. However, it seems that he neglected to correctly file a claim on that money, and possibly on other income as well. As a result, this recording star owes back taxes totaling over $200,000! It is said here that he owes over $171,000 to the IRS and over $21,000 to the Alabama Department of Revenue.
Tough Lessons to Learn
A lesson to anyone who begins earning more income, or who receives a large sum of money, is to hire a tax professional to help you correctly file your tax returns and pay your taxes.
Unfortunately it’s too late for Ruben Studdard. The IRS is after him, and his tax problems will be more difficult and expensive problem to resolve. Another lesson we can learn here is that even if you already have an IRS problem, it’s better to begin dealing with the problem as soon as you can.
Although most of us don’t take this into consideration, some people choose their citizenship based on tax exposure. They may live in the US because taxes are cheaper here (than elsewhere) or they may move from the US to a location with even cheaper taxes.
In a Forbes.com article entitled “Ten Facts about Tax Expatriation”, Robert W. Wood lists important information that you should know if you are thinking about moving to or from the US in order to modify your tax exposure. I’ll summarize the ten items here but you should read them in greater detail in Wood’s article.
And his ten tax expatriation facts are:
The government taxes all income worldwide. So the money you made elsewhere? The IRS wants some of it.
If you’re going to leave for tax reasons, you need to really leave. You can’t fake it. If you’re here more than 30 days in a year, you are considered a citizen or resident of the US.
There was a loophole that allowed you to get out of some taxes if you left for a reason other than tax avoidance. It comes as no shock to anyone that this loophole was closed.
In 1996, Congress just assumed that anyone with a net worth greater than $500,000 was leaving the US to avoid taxes. Nice!
In 2004, the US decided to stop guessing and just impose a tax on all US-based income for ten years after someone moved away.
There are special rules for long term residents (as if the tax law isn’t already complicated enough).
There’s an exit tax (or, as I like to call it, a “slap in the face” tax) for anyone leaving after June 17, 2008: Essentially everything you own in the world is considered to have been sold at market value and you have to pay a capital gains tax on it…
… unless the income is less than $600,000. So this is a “slap wealthy people in the face” tax. And it shouldn’t surprise you that Woods spends another 2 paragraphs going into detail about the complex calculations surrounding this.
You can defer this tax but it’s complicated.
Woods says it perfectly: “You’ll need professional help.”
Entry and exit is an interesting situation: Various agencies (like Homeland Security and the US Citizenship and Immigration Service) do a thorough job of making sure that it’s not easy to get into the US… and the IRS makes sure it’s not easy to get out of the US.
“Welcome to the USA… now that you’re here, you’ll pay taxes and you won’t be able to leave.”
What Should Non-Filing Taxpayers Do?
