Federal Tax Laws - IRS and Your Money

The 16th Amendment to the United States Constitution gave Congress the power to collect income tax. The Internal Revenue Service has been collecting taxes on income since 1913, and people have been trying to get out of paying the IRS ever since.

You may owe the IRS because of simple mistakes on your returns, unethical actions by your tax preparer, or as a protest to the income tax. No matter how you got in this situation, you can quickly be in over your head.

Take action now to protect your income, your assets, and your credit. Connect with a tax attorney to discuss your options in dealing with the IRS's aggressive tactics. Simply fill out the free online evaluation form below to find a tax attorney near you.

The IRS audits a certain percentage of tax returns to check for errors and fraud. Most audits are selected by a computer program that uses a secret formula to find suspicious returns.

What could lead to an audit? Some common traits are:

• Math mistakes: If either you or the IRS agent entering your return into the computer made a simple mistake, it could cost you big.
• Too many deductions: The IRS compares the deductions you take to those common in your area and income bracket. If you're taking too many, it's a red flag.
• Numbers don't match: Sometimes the numbers on your return don't match those on your W-4 or 1099. The IRS especially looks for small businesses, the self-employed, or jobs where being paid in cash is common.
• You used the wrong preparer: Some tax preparers try to cheat the IRS – and you – and the IRS knows about them. You may have been promised a big refund, but instead got big trouble.

The Internal Revenue Code establishes statutes of limitations for taxpayers and for the IRS itself.

As a taxpayer, you have three years to claim a tax refund. If you haven't filed a tax return, but are owed money by the government, you can file up to three years late and still receive your refund.

The IRS has three years to audit your returns. So it's a good idea to hang on to your old tax forms. If you are currently being audited, any new tax returns you file can also be audited. And if the IRS suspects criminal tax fraud, they may be able to go back even further.

The IRS has 10 years to collect outstanding taxes. Once the IRS has established that you owe the government for back taxes, they can collect, and asses penalties and interest, for up to 10 years. Any balance you owe after 10 years is usually wiped clean.

The IRS charges a number of penalties for underpaid or unfiled taxes. A sliding scale increases the penalties for larger amounts, and for potential fraud.

In many cases, the IRS adds penalties for each month you are delinquent. For example, for late payment, the IRS charges and additional 0.5% of the balance per month, up to 25%.

Additionally, interest on unpaid taxes is compounded daily. The interest rate changes every three months, and adds up quickly – you can easily owe twice as much as your original debt. On its website, the IRS suggests taking out a bank loan or credit card loan simply to avoid the high interest and penalties.

Worrying about unpaid taxes? Let a tax attorney answer your questions and offer advice. Even if you owe taxes to the state, or operate a small business, a local tax attorney can explain the laws that could affect your money, home or business.

Simply fill out our free online evaluation form to connect with a tax attorney near you. It's not too late to get the tax help you need.

The above summary of tax laws is by no means all-inclusive and is not legal advice. Laws may have changed since our last update. For the latest information on tax laws and penalties, speak to a tax attorney in your area.