Each year millions of Americans receive notices from the IRS that they owe taxes. This problem is often caused by mistakes made when filing tax returns or due to miscalculations made by the IRS. The IRS can often correct these errors without any penalties being assessed. However, if the errors are significant or involve failure to file or pay, there are penalties that can be imposed. While most people think they can correct their mistakes by filing an amended return, the IRS has a different view. In some instances, the taxpayer may need to take their case to court and have it litigated by a judge. This is called a Tax Court case, handled just like any other court matter.
Tax Court cases often revolve around employment and payroll tax issues. These are cases where a person or business is not reporting income correctly or is using illegal schemes to avoid paying employment and payroll taxes. The IRS aggressively pursues these situations because they violate the law and create an unfair tax advantage for those engaged in them.
In these cases, the IRS will often seek to enforce a summons to force a person or business to produce relevant documents and information about their tax liability. This process is outlined in the Tax Code and is a powerful tool for the IRS to have when investigating a tax debt. In most cases, the IRS can successfully serve a summons on individuals or businesses that have a record of violating tax laws.
There are many reasons why a tax matter might end up in the Tax Court, including disagreements with the IRS about how to interpret the law or how the law applies to certain situations. It is very important for people and business owners to stay current on the ever-changing tax laws and changes that occur each year. Various sources of tax news are available, including the IRS website, webinars, and professional organizations. A lawyer can also be helpful in keeping up with the latest tax law changes.
Major Tax Issues
One of the most common tax problems is failing to file or pay on time. This can be caused by a number of factors, including forgetting to file, missing deadlines, or not paying enough taxes. In addition to these issues, people often make mistakes when calculating their taxes or submitting their returns. This can lead to significant penalties and stress.
Another tax problem is failing to maintain proper records. This can include not keeping track of deductible expenses, maintaining adequate business records, and not separating personal from business use of property. These problems can be avoided by keeping good recordkeeping and utilizing software to keep track of your expenses.
Another major issue is evading taxes. This can be done intentionally or unintentionally, and it is important to distinguish between tax avoidance and evasion. Tax evasion is the illegal act of concealing or underreporting income, while tax avoidance involves taking advantage of legal ways to reduce your tax liability.
Finally, another tax problem is failing to respond to IRS notices in a timely manner. This can be a big problem, especially with late filing penalties. To avoid this, you should respond to all notices from the IRS on time and provide any required documentation.