IRS Getting More Aggressive During Recession, Austin Tax Attorney John McDuff Says

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Texas Business Lawyer Offers Advice for Handling an IRS Audit After Tax Season

With over 30 years of experience in business and tax law, I have developed the knowledge to help business owners and individuals protect their assets in the State of Texas.

Tax day has come and gone. Unless an extension was filed, tax documentation was submitted more than a month ago by most businesses, families and individuals. Now the IRS gets busy. The federal agency is particularly aggressive in the current recession. Since the economy has struggled, the federal government has also struggled. Funding federal programs requires tax revenue. When they economy is not strong, that revenue may fall. This may lead to IRS agents becoming more and more aggressive about pursuing any and all back taxes, interest penalties, and fines.

If you owe back taxes, interest, or fines, the IRS will do all that they can to get the maximum amount possible, says Austin Tax Attorney John McDuff. McDuff has been focused on business and tax law for more than 30 years in Texas. As the season for audits and tax revenue collection gets into full swing, and as the recession continues to linger, McDuff has a few tips for readers facing the IRS.

The first step is to make sure that a file is submitted especially for business owners or corporations. If a return is not filed at all, the IRS may file on behalf of a taxpayer. In their filing, the IRS will seek to collect the largest possible amount. McDuff offers some details on the IRS’s filing process: “These returns, called 6020b’s, are a taxpayer’s worst nightmare. All of the income reported to the IRS, including W-2’s and 1099’s, as well as other reports, are taxed, with no deductions given. The IRS uses the most taxable filing status, and gives no exemption for dependents.” For most taxpayers—but especially business owners—deductions and exemptions are vital.

Problems multiply for business owners who do not file because unnecessarily high tax bills may result due to fines and interest accumulating. The threat of prosecution is also a real possibility. McDuff will file a return for clients even if it is late and will urge the revenue officer to accept the new return in place of the 6020b. Having an attorney to minimize the risk of prosecution is also crucial to success when the IRS is conducting an investigation, McDuff says.

Some of the best protection from paying tax penalties is to review the already submitted documentation: accountants, tax preparers, and bookkeepers make calculation errors all the time. The least amount due should be verified. “The tax may be overstated, due to your mistakes on your returns, or your accountant’s mistakes,” McDuff asserts. As a Texas tax accountant who has served thousands of clients, McDuff has been successful in getting the IRS to accept amended returns after errors have been discovered.

For many taxpayers, simply filing and reviewing already submitted forms will be a solution. But even for more complex or challenging tax struggles, there is relief. By turning to an experienced tax law attorney early in the process, many of tax problems can be avoided, McDuff says. But regardless of how deep the problems, how large the tax bill, and how long the tax issue has lingered, a tax lawyer can still offer assistance.

For many people, McDuff states that a “filing of bankruptcy should be considered. Generally, if the taxes are three years old, a bankruptcy will wipe the slate clean” but “filing bankruptcy is a very personal decision, and there are many other considerations in deciding to file one.” Bankruptcy is often the best way to protect one’s assets. If McDuff believes the bankruptcy filing is appropriate after a consultation, clients can seek out a bankruptcy specialist or request a referral.

Filing a return, even if it is late; minimizing the amount of taxes owed; considering filing bankruptcy; these three tips may help during this recession’s tax collection season. But McDuff has other suggestions as well especially when IRS penalties are concerned.

The financial penalties imposed by the IRS can seem overwhelming. Like many Texas tax attorneys, McDuff has successfully helped clients avoid such tax penalties. “It is appropriate to ask whether the penalties can be waived by the IRS. While there are many considerations on this issue, ‘reasonable cause’ is the watchword. It is important to know the case law on this subject, and, on occasion, have the capability to write a mini-brief.”

If the penalties cannot be waived, the amount owed may be reduced. Rather than accepting the fines and penalties the IRS imposes, “it is best to start with an effort to get the debt discounted in exchange for a part payment from a source other than you. The correct form is the Offer in Compromise. This usually means family or friends, as the source of the payment of a part of the debt.”

McDuff also states that a feasible way forward is to set up a monthly payment plan with the IRS. “With a monthly payment in place, the IRS will cease collection activities such as levies and other measures.” Sometimes the IRS asserts an amount that must be paid each month to remain in good standing. For many clients, the monthly payment amount that the IRS suggests is not realistic. A tax attorney may be able to get the amount reduced and McDuff has often gotten these monthly payments reduced to more reasonable levels.

The IRS may be relentless in their pursuit of tax revenue especially during a recession. Many Texas taxpayers—and taxpayers throughout the United States—may benefit from McDuff’s suggestions for dealing with the IRS.

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