IRS Penalties for Unreported Foreign Accounts and Income

IRS jurisdictions of monitoring and ensuring tax compliance among US taxpayers extend not only to accounts on US territory, but also to financial accounts held abroad. 

To ensure that these requirements are met, the government requires FBAR submissions from all qualified taxpayers with foreign accounts to comply with the country’s tax laws. 

Continue reading to learn more about unreported foreign accounts, FBAR filing, and the consequences for violating the law. 

 

What Is FBAR Filing and Who Needs to File?

FBAR Basics (Report of Foreign Bank and Financial Accounts)

The Foreign Bank Account Report (FBAR), also known as FinCEN Form 114, is an annual report required to be filed by U.S. taxpayers with a foreign financial account. 

The FBAR is mandated by the Bank Secrecy Act (BSA) to monitor overseas account transactions held by US citizens. The FBAR is designed to prevent financial crimes, such as money laundering, tax evasion, and other financial offenses. 

 

Who Must File an FBAR

Those who must file FBAR include those who meet the following criteria:

  • Citizens, alien residents, or U.S. entities such as corporations, partnerships, trusts, or limited liability companies.
  • Have a financial stake in, or signature authority over, one or more overseas financial accounts. These accounts may include bank accounts, securities, mutual funds, cash-value insurance policies, and accounts held in foreign branches of U.S. banks or U.S. branches of foreign banks.
  • With a threshold exceeding $10,000 at any time during the calendar year.

 

Reporting Foreign Income: IRS Filing Obligations Beyond FBAR

4 stacks of coins, each one smaller in size in foreground with man i background with pen in his hand

IRS Form 8938 (FATCA Reporting)

FATCA, commonly known as IRS Form 8938 or Statement of Specified Foreign Financial Assets, is another tax form that U.S. taxpayers must file along with their annual income tax return (Form 1040). FATCA complements the FBAR by requiring the reporting of any foreign assets and accounts owned. 

Similar to the FBAR, U.S. citizens who own financial accounts in foreign financial institutions and other foreign financial assets and interests (such as stocks, securities, partnerships, corporations, and mutual funds) are required to file FATCA. 

Taxpayers who have a total value of foreign financial assets exceeding the following amounts are bound to FATCA regulations:

  • $50,000 on the last day of the tax year or $75,000 at any time during the year (for unmarried individuals living in the United States)
  • $100,000 on the last day of the tax year or $150,000 at any time (for married filing jointly residing in the United States)
  • $200,000 on the last day of the tax year or $300,000 at any time (for unmarried individuals living outside the United States) 
  • $400,000 on the last day of the tax year or $600,000 at any time (for married individuals residing outside the country) 

 

Other Common Forms

In addition to the FBAR and FATCA, US taxpayers with foreign income or assets may be required to file additional IRS forms (3520, 5471, 8621) to record specific foreign financial activities or interests.

Form 3520 is used to report transactions involving foreign trusts (such as distributions and donations) and substantial gifts from overseas corporations or persons.

Form 5471 reports ownership or control of certain foreign firms to guarantee income and transaction transparency, especially for Controlled Foreign Corporations (CFCs).

Form 8621 reports direct or indirect distributions and gains from a Passive Foreign Investment Company (PFIC) or Qualified Electing Fund (QEF). 

 

Consequences of Unreported Foreign Accounts and Income

document showing "amount you owe"

Unreported overseas accounts and income can result in significant issues, including penalties and even imprisonment. Non-willful violations, which include failing to report a financial account due to negligence, misunderstanding, or other reasons without intent to evade taxes, can result in penalties of up to $10,000 per violation. 

Wilful violation, which occurs when a taxpayer knowingly or recklessly fails to report foreign accounts or income—indicating intent to evade taxes—is punishable by the greater of $100,000 (adjusted for inflation, approximately $160,944 for 2025) or 50% of the account balance at the time of the violation per violation.

Criminal FBAR applies when non-compliance results from intentional tax evasion, fraud, or other illegal activities. The penalties can include fines of up to $250,000 and/or imprisonment for up to 5 years. 

If taxpayers are part of a conspiracy or a pattern of illegal activity (e.g., money laundering or hiding income), penalties can increase by $500,000 or more, and imprisonment can be up to 7 years. 

 

Additional IRS Penalties

Other penalties that may be imposed for failing to comply with IRS foreign reporting requirements include accuracy-related penalties of up to 20% of the underpayment and 40% of the underpaid tax for underpayments related to undisclosed foreign financial assets.

Failure to file a tax return that includes foreign income or Form 8938 may result in both the failure-to-file penalty and the form-specific penalty. 

Late tax returns are subject to a monthly penalty of 5% of the unpaid tax, up to a maximum of 25% of the total tax amount. Similarly, undeclared foreign income that results in underpaid taxes can lead to a failure-to-pay penalty of 0.5% per month of the unpaid tax, up to a maximum of 25%.

Furthermore, failure to meet your tax requirements, including the disclosure of foreign accounts, may result in an audit and potentially lead to long-term tax consequences. 

 

What Triggers IRS Scrutiny?

Non-compliance or inconsistencies in these filings are the main trigger for an IRS audit or scrutiny. 

The IRS cross-references data, for instance, FATCA disclosure, with U.S. taxpayers’ filings (e.g., FBAR, Form 8938, or Form 1040) and checks for accuracy. Large international or frequent transfers, or those with suspicious patterns, are more likely to get more scrutiny from the authorities. 

Minimize scrutiny by taking the necessary steps, such as filing on time and accurately, disclosing all accounts and assets, and paying taxes in a timely manner. 

 

How to Correct Unreported Foreign Accounts or Income

Just like with filing taxes or paying taxes late, taxpayers are given opportunities to fix unreported foreign accounts or income. This is possible through:

 

IRS Voluntary Disclosure Programs (VDP): Allows taxpayers who willfully failed to report foreign accounts or income to disclose their non-compliance proactively, potentially avoiding criminal prosecution while resolving tax and penalty obligations. 

To qualify, one must be a U.S. taxpayer with unreported foreign accounts or income and have a valid Taxpayer Identification Number (TIN). Moreover, it is essential to apply for VDP promptly, before the IRS initiates an audit or investigation. 

 

Streamlined Filing Compliance Procedures: The Streamlined Filing Compliance Procedures allow non-willful taxpayers to correct unreported foreign accounts or income with reduced or no penalties. 

U.S. taxpayers must certify non-willful conduct with a signed statement under penalty of perjury, be free of IRS audits or criminal investigations, and have a valid TIN.

 

Delinquent FBAR or Informational Return Submissions: This option allows for filing delinquent forms accompanied by a reasonable cause statement to avoid penalties, for individuals with no unreported income (no tax liability) who failed to file their FBAR.

Eligibility includes no underreported income or unpaid taxes, being neither under IRS audit nor investigation, and not having committed a non-willful failure to file (e.g., due to ignorance or oversight).

FBAR filing issues - United States passport sitting on other documents

Why You Need To Hire an Expert Tax Attorney for FBAR Issues

Unreported foreign accounts and income are a severe tax issue that should not be overlooked. 

Therefore, if you wish to take any action, such as filing an FBAR, resolving a problem, or communicating with the IRS, we strongly advise you to seek expert assistance. A tax attorney has familiarity with all aspects of the tax system, including determining the best answer for your unique case.

Contact Greenberg Law today and let us help you avoid tax difficulties!

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IRS Tax Lien vs Tax Levy: What’s the Difference?

Tax issues arise for various reasons, and their implications range from mild to severe. Liens and levies are two severe problems that all taxpayers want to avoid. These types of tax issues will affect not only your finances but also your assets. 

So, what are the differences between a tax lien vs tax levy? Let’s explore these topics today. 

 

What Is a Tax Lien?

What is a Tax Lien? Stressed man sitting in office with scattered papers

Definition and Purpose

A tax lien is a tool employed by the IRS to secure outstanding debts by legally placing a claim against taxpayers’ assets. A tax lien entails filing a legal document that informs the public of the government’s legal claim against the taxpayer’s assets. 

 

What a Lien Affects 

Once a tax lien has been filed, the IRS has precedence over other parties in claiming your assets, which include real estate, personal property, and financial assets.

 

When Is a Tax Lien Filed?

A tax lien is filed after several notices to the debtor have been sent, informing the taxpayer of outstanding tax liabilities. 

If taxpayers neglect these notices, the IRS can issue a Notice of Federal Tax Lien, a public notice informing them that they have claimed the assets of the concerned persons or businesses.  

 

What Is a Tax Levy?

What is a tax levy? 2 people sitting at table with tax documents, a calculator, and mugs

Definition and Purpose

A tax levy is the legal seizure of property and assets to repay outstanding obligations. Levies can occur when taxpayers continually ignore IRS letters or notices. In contrast to a tax lien, which is a legal claim on the taxpayer’s assets, a levy is the actual collection action. 

 

What the IRS Can Levy? 

The IRS has the authority to levy everything from bank accounts to wages, real estate, automobiles, and retirement savings.

 

When Does a Tax Levy Occur?

A tax levy is imposed when individuals and businesses continue to fail to pay their tax bills. 

The IRS sends multiple notices, including a Notice of Federal Tax Lien and a Final Notice of Intent to Levy, to notify taxpayers of the tax issue and provide them with the opportunity to resolve the issue using the various available options.

 

Key Differences Between a Tax Lien vs Tax Levy

Feature Tax Lien Tax Levy
Type of Action Claim to property Seizure of property
Impact Affects the ability to sell Immediate loss of funds/assets
Notice Required Yes, Notice of Federal Tax Lien Yes, Final Notice of Intent to Levy
Asset Seizure No Yes
Resolution Pay debt, installment agreement, appeal Urgent legal action is required to prevent loss

 

How Liens and Levies Affect You

Financial Consequences

When it comes to the financial consequences of liens vs levies, both will have a significant impact on your finances. 

These two actions can restrict your access to your finances and assets, such as being unable to withdraw money due to a bank freeze, having accessible funds decreased due to wage garnishment, or being unable to sell or refinance your property. 

This can all result in financial difficulty, not to mention the mounting penalties and interest that accrue from unpaid debts.  

 

Legal Consequences

Liens and levies also carry the same legal implications. 

As the IRS is a legal entity supported by the country’s laws, it takes efforts to ensure taxpayers fulfill their tax obligations. Any requests that are not met will result in legal ramifications. For instance, ignoring these notices can result in asset seizure and the creation of a public record, which will notify others of the claim on your property, potentially complicating any subsequent legal issues.  

Tax documents and tax papers sitting scattered with 3 stacks of coins with blocks spelling out "T" "A" "X" on top of them

Can a Lien or Levy Be Removed?

Removing a Tax Lien

There are various options for removing a tax lien. The first step is to settle all tax debts in full, including fines and interest. 

Once paid, you must still request a withdrawal using Form 12777. The IRS will typically remove the lien within 30 days and provide the taxpayer with a Certificate of Release of Federal Tax Lien. 

Discharge or subordination are other options to stop a tax lien temporarily. 

A discharge is an option if you need to sell or transfer a specific property; you can request a discharge  (Form 14135) to remove the lien from that property. The IRS may approve if the property’s worth exceeds the tax liability and the IRS receives an equivalent amount (for example, sale proceeds).

A subordination permits other creditors to take precedence over the IRS lien (Form 14134), facilitating loans or refinancing. The IRS may agree if it facilitates debt repayment without removing the lien.

 

Releasing a Tax Levy 

Levies, like tax liens, can be removed by paying the entire amount owed. Settling with the IRS through an agreement, such as an Offer in Compromise or Installment Agreement, also halts any collection activities as long as the individual or business adheres to the arrangement. 

Another way to release a tax levy is to prove that the levy causes immediate economic hardship (e.g., inability to pay for basic living expenses). Request for relief by filing Form 1127

Lastly, if you believe there was an error that resulted in the levy, you can file an appeal (Form 12153) within 30 days of receiving the IRS levy notice. The levy may be suspended until the validity of the challenged levy is determined. 

 

What Should You Do If You Receive a Lien or Levy Notice?

Receiving a notice of lien or levy is understandably distressing. However, if you have reached this point, you should take precautions to prevent further complicating the situation. As we covered in this article, there are steps you can take to avoid the problem from escalating, such as paying off all debts or getting into a payment agreement with the IRS. 

Your choice should also be based on your specific situation. That is why you should be diligent and informed while making a decision. Consult with a professional to ensure the best potential outcome for your situation.   

 

How Greenberg Law Group, P.A. Can Help

Greenberg Law’s team of tax professionals has extensive experience managing a variety of tax matters, including liens and levies. We understand the process and know how to devise the best resolutions for your specific circumstance. 

It is of utmost importance that if you are experiencing tax issues, you should not delay taking action. The more you delay, the more problems will come your way. 

Contact us immediately, and let’s develop a specific approach to prevent the issues from escalating.

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How Do I Fix My Tax Problems?

We all want to avoid tax problems. However, on some occasions, tax problems arise due to a lack of understanding of tax obligations or how to respond to various tax situations. In this article, we’ll examine the various tax issues that can arise and answer the central question: How do I fix my tax problems? 

Understanding Your Tax Problems

One of the most critical aspects of navigating taxes in the United States is understanding federal and state tax regulations, including the various taxes that exist, which ones apply to you, the tax deadline, and, if there is an issue, identifying the problem and resolving it effectively. 

 

Common Tax Issues

Below, we’ve listed the most common tax issues:

Unfiled tax returns: An unfiled tax return occurs when an individual fails to meet the deadline for filing their tax returns. The good news is that the IRS offers opportunities for taxpayers in various challenging situations to extend deadlines or make payments on their debts over time. 

 

Back taxes owed to the IRS: Back taxes refer to tax debts from previous years that are typically caused by underreporting income, underpaying estimated taxes, and failing to file tax returns on time. Back taxes mean you will be charged interest and penalties until the debt is paid. 

 

IRS notices and collection letters: The IRS sends notices to taxpayers about outstanding tax issues. The IRS will send several notices to individuals, allowing them to acknowledge and communicate to resolve the issue. Failure to respond to the notices may result in more complex tax issues, such as liens and levies. 

 

Tax liens and levies: If taxpayers fail to respond after receiving multiple notices, the IRS will take action, including the issuance of tax liens and levies. This is a serious problem that can lead to various issues, including asset seizure. 

 

Wage garnishment or bank account seizures: When a taxpayer fails to pay their tax debts, the IRS can garnish wages or seize funds from bank accounts to collect the unpaid taxes. This usually occurs after multiple notices and a failure to resolve the debt.

 

IRS audits or audit appeal: An IRS audit entails the IRS reviewing your tax returns. It’s important to note that being audited doesn’t always mean you’re in trouble. Some audits are performed as part of a routine to ensure that individuals meet their tax obligations, so anyone can be audited. If you are audited and have issues as a result, you can still file an appeal if you believe the findings are incorrect. 

Stressed man with head in his hands looking down at tax papers on table

 

Why It’s Critical Not to Ignore Tax Problems

The most important aspect of avoiding trouble with the IRS is to file your taxes correctly and on time. Ignoring IRS letters and other communications will only exacerbate the problem, potentially leading to more complex situations that can cause financial disruption. 

When contacted by the IRS, respond promptly and accurately. For the best results, seek professional assistance to ensure effective communication and that any necessary negotiations are conducted with best practices.  

 

How Do I Fix My Tax Problems? 

Step 1: Understand What You Owe

The first important step in resolving your tax problem is to fully understand your tax debt. This is because if you don’t know what you owe, it will be challenging to plan effectively and find the best solution to your problem. 

In this step, you should gather all necessary documents (such as IRS notices and other correspondence) and review their content. Look for information such as the amount you owe and any applicable penalties or returns. 

You should also identify the tax years for which you owe money or the tax returns that you have yet to file. Typically, the IRS prioritizes debts incurred within the last three to six years, but it may also collect older debts. 

If you do not already have an IRS account, you can create one through their website. Once that is completed, check your account. It will display your tax balance, payment history, and any penalties and interest owed. 

 

Step 2: File Any Missing Returns

If you have not filed your tax returns, do so as soon as possible. Filing prevents the failure-to-file penalty and demonstrates good faith. 

However, before proceeding, you should ensure that you have all required documents, such as W-2s, 1099s, receipts, and other income or deduction records. If any records are missing, you can request wage and income transcripts from the IRS or contact your employers or banks. 

Once you have all of the supporting documents, file your information correctly. This is critical because errors can lead to further problems. 

 

Step 3: Evaluate Your Options for Tax Relief

The next step in resolving your tax issues is to determine the most suitable option for your specific tax situation. Once you have determined how much you owe and filed all of your returns, select one of the options available to you as a taxpayer. 

Depending on your circumstances, this option could be a payment plan, such as an Installment Agreement (IA), an Offer in Compromise, a Currently Not Collectible option, or Penalty Abatement. Ensure you select a resolution that is within your means and puts you in the best possible position for the future. This is when a tax attorney can be extremely helpful.

 

Step 4: Respond to IRS Collection Actions

IRS folder with American flag in backgroundIf you have received a notice from the IRS regarding collection actions, time is of the essence, and you must make a decision promptly. Understand what is on the notice (for example, an action to levy or lien) and be aware of your rights. 

Another option available to you is to request a Collection Due Process (CDP) Hearing. This allows you to challenge the action or propose alternative resolutions. 

 

When to Contact a Tax Attorney

Having a tax attorney on your side is the best course of action when dealing with various tax issues. This is especially critical if you have received an IRS notice or summons, owe more than $10,000 in taxes, or are unsure or overwhelmed by your current situation and don’t know where to start.

A tax attorney can assist you in understanding the issue at hand, presenting the options available to you, determining the best resolution for your case, and negotiating on your behalf. Having an expert by your side will make the entire process less stressful and more effective in terms of achieving the best results. 

 

End Note

So, how do I fix my tax problems? The most important thing is understanding the tax issue you are dealing with, what it entails, what options you have, and what the best course of action is. Finding yourself with tax issues can be a stressful experience. If you have tax issues, contact Greenberg Law Group. Our team will help you find the best strategy to resolve your issues and prevent future problems!

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My Tax Return is Being Audited. What Does This Mean?

Receiving the news that your tax return is being audited can be a concerning development. However, understand that being audited doesn’t always mean something is wrong. Audits are a regular part of ensuring taxpayers meet their tax obligations. Read on to learn more about IRS audits. 

 

What Is a Tax Return Audit?

An IRS tax audit is a formal review of your tax return and supporting documents to ensure that income, deductions, and credits are reported accurately and correctly. 

While having your tax return audited may appear alarming, this critical step can happen to anyone and shouldn’t worry you, especially if you have done nothing wrong.

 

Common IRS Audit Misconceptions

“Only people who did something wrong get audited.” The IRS can conduct audits at random, even of law-abiding citizens.

“Getting audited means I’m going to owe a lot of money.” IRS audits will examine the accuracy of the information reported. This doesn’t necessarily imply that you will owe more money to the authority. 

Even if discrepancies are discovered, you have the opportunity to correct them. In fact, many audits yield no changes or even a refund. If you missed a calculation and ended up paying more taxes than you should, you can be notified by an audit and receive a refund.

Magnifying glass hovering over calculator with word 'audit' displaying

Why Is My Tax Return Being Audited?

Common Triggers for a Tax Audit

The IRS selects returns for audits using both manual and automated processes. The following are some red flags that may trigger an audit:

Math errors or inconsistencies in reported income: Even simple mistakes, such as typos and miscalculations, can alert the IRS. 

The reported income must also match the forms employers or clients submit, such as W-2s. Ensure there are no discrepancies between the income you declare and what your employer has reported. 

Unusually high deductions or charitable donations: If the amount you deduct or donate seems disproportionate, this will raise a red flag. 

For example, claiming $30,000 in charitable donations on a $60,000 income may appear suspicious, particularly if you don’t have clear documentation, such as receipts or letters from the charity. 

Large business losses or self-employment income: The IRS may audit self-employed individuals or business owners who have reported significant business losses year after year, as this could indicate underreporting income or inflating expenses. 

The IRS may verify the figures to ensure they’re legitimate, not personal expenses disguised as business deductions.

Random selection by IRS algorithms (DIF score system): The IRS uses a Discriminant Inventory Function (DIF) system to assist in selecting returns based on the likelihood of errors. While high DIF scores may trigger an audit, individuals can still be selected using algorithms even if there are no apparent errors.

man sitting at desk sorting through tax documents with paper bills and calculator

Types of Audits

There are three types of audits, each with a specific purpose and level of severity.

Correspondence

A correspondence audit is conducted entirely by mail, including resolution. The IRS will request documentation or clarification on some items listed on your returns.

Office

As the name implies, office audits are conducted in person at the local IRS office. The auditor will review the items in question and may request additional documentation or explanation. 

Field

This type of audit is the most in-depth and usually occurs in more serious cases or with high-income earners. IRS agents conduct these audits at the taxpayer’s home or at their place of business. 

 

What Should I Do If I’m Being Audited?

1. Read the IRS Letter Carefully

If you’re selected for an audit, you’ll be notified by letter from the IRS. The letter will include the tax year under review, the items being examined, and the type of audit being conducted. 

It’s critical that you read the IRS letter carefully and understand what it’s asking. Misinterpretation of information can result in the provision of incorrect documents and irrelevant information, which can lead to further problems. 

 

2. Gather Supporting Documentation

If errors or discrepancies are found, you’ll be prompted to provide supporting documentation. Depending on the items being reviewed, this may include bank statements, receipts, employment records, acknowledgment letters for charitable donations, and other relevant documents.

 Make sure the documentation you provide is relevant to the issue at hand, as it will be used as evidence to prove your case. 

 

3. Respond Promptly and Accurately

When dealing with the IRS, time is of the essence. Timely and precise responses demonstrate cooperation and can help prevent the audit from being escalated. 

Whether the audit is conducted by mail, in an IRS office, or at your location, make sure your submission addresses the IRS’s concerns directly.

 

Possible Tax Return Audit Outcomes

Tax audit outcomes between two men shaking hands over a desk, one being a tax attorney

Tax audits can have various outcomes, depending on the findings and resolution of discrepancies.

No changes: 

This means that your tax returns have been determined to be accurate or that the documents you provided to resolve the discrepancies are sufficient to prove your case. In these cases, no additional action is required. This would be the best possible outcome of the audit. 

Agreed change: 

Occurs when errors are discovered, but you and the IRS have agreed on a resolution, and adjustments have been made. For example, if you fail to report some of your income, you agree to pay the remaining taxes and any penalties and interest. 

Disagreed change: 

This occurs when disagreements arise with the IRS regarding the audit results, and a resolution is not reached. The following steps may include filing an appeal, meeting with an auditor to discuss the differences, or taking other actions, such as bringing the case to tax court. This outcome is complex, so professional assistance is strongly advised. 

 

Conclusion

If your tax return is being audited, it can be nerve-wracking because most of us believe it results from doing something wrong and will lead to serious trouble. 

While it’s true that breaking tax laws can result in an audit and additional problems, the IRS conducts audits through random selection, such as using algorithms, which can also target law-abiding citizens. However, if you’ve fulfilled all of your tax obligations by the regulations, you shouldn’t be concerned. In some cases, an audit may even result in a tax refund. Even if discrepancies are found, you have opportunities to correct them during the process. 

Contact Greenberg Law Group to help you accurately report your tax returns and identify any errors or discrepancies before it’s too late, preventing dealing with the authorities. 

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What Happens If You Miss The Tax Deadline? Here’s What To Do

Every year, all taxpayers are required to meet a tax deadline, which typically falls on April 15. What happens if you miss the tax deadline this year? What should you do? This article will provide more detailed information on this specific topic. 

 

What Happens If You Miss the Tax Deadline?

If you didn’t hit the tax deadline this past April 15, the immediate consequences that will apply to you are:

Failure-to-file penalty: Missing the tax deadline places you in the failure-to-file category. This means that you’ll receive a penalty. The penalty is 5% of the unpaid taxes for each month or part of the month when the return is late, with a maximum penalty of 25%.

Interest accrues on unpaid taxes: Interest begins to accrue on the due date. The interest rate is determined quarterly,  based on the federal short-term rate plus 3%.

Loss of refund if you don’t file within three years: Failure to pay on time risks losing a tax refund. There’s a three-year window following the original filing deadline. For example, if you have a $1,000 tax refund for the year 2024 and don’t file by April 15, 2028, you’ll lose it permanently. 

 

Understanding what happens if you miss the tax deadline can help you minimize penalties and take corrective action as quickly as possible.

 

First Steps You Should Take If You Didn’t Hit the Tax Deadline

Tax files and documents sitting on a table with a green background

If you’re wondering what happens if you miss the tax deadline, the most important thing to know is that taking action quickly can significantly reduce the consequences.

1. File as Soon as Possible

The best course of action after missing the deadline is to file immediately. Filing as soon as possible will help you avoid accruing the penalty. The longer you wait, the more the penalty you’ll face. 

 

2. Pay What You Can Immediately

If you can pay your taxes in full, that’s great. But if not, pay what you can right away. Whatever amount you pay will reduce the failure-to-pay penalty. 

Partial payment also demonstrates good faith on your part, which may be helpful in future interactions with the IRS.

 

3. Apply for a Payment Plan (Installment Agreement)

If paying in full isn’t an option, consider applying for a payment plan to help you manage your taxes more effectively and reduce the penalty. For example, an Installment Agreement allows taxpayers to repay their debts over time while reducing the monthly failure-to-pay penalty to 0.25%. A payment plan also prevents aggressive IRS collection actions, such as levies and wage garnishments, allowing you to manage your debt with less scrutiny.  

 

Consider Filing for Penalty Relief

First-Time Penalty Abatement (FTA)

You may be eligible for First-Time Penalty Abatement (FTA) if this is your first time missing the deadline. Certain penalties may be waived if it’s proven that this is the taxpayer’s first offense.  

However, there are specific requirements to be eligible for this option. These include having a clean compliance history, such as no other penalties for the previous three tax years, filing all required returns for the current and prior years, and paying or being enrolled in one of the IRS’s approved payment plans for the taxes owed. 

 

Reasonable Cause Relief

If you missed the tax deadline due to circumstances beyond your control, such as a natural disaster, illness, or severe financial hardship, you may qualify for reasonable cause relief.

Like FTA, reasonable cause relief allows taxpayers to avoid penalties for missing the tax deadline. Unlike an FTA, however, reasonable cause relief is not restricted to first-time offenders. 

You must provide documentation to support your claim of circumstances, such as disasters, serious illness, or severe financial hardship. This includes medical records or doctor’s statements, FEMA reports or insurance claims, as well as financial bank records or statements.  

 

What Happens if You Miss the Tax Deadline Several Years in a Row?

What if you haven’t filed your taxes in several years? The best step is to stop ignoring the problem. The longer you wait, the more costly and complicated the problem will be. Failing to file your taxes can result in aggressive actions, such as levies and wage garnishment, and jeopardize your situation, including social security benefits, loan approval delays, or even criminal charges.

If you haven’t filed your taxes in years, contact Greenberg Law Group. A professional’s assistance is crucial in properly navigating the issue and determining the best course of action based on your specific situation, thereby preventing the problem from escalating. Allow us to assist you in determining the best course of action to get you out of trouble.

two people shaking hands

Avoiding This Problem in the Future

As you can see, missing tax deadlines can result in significant fines and a complicated situation. Avoid missing deadlines by creating a reminder system, such as marking key dates on your calendar or setting digital reminders, to stay easily informed of critical tax deadlines

Furthermore, if filing your taxes by April is impossible, you can apply for a six-month extension using IRS Form 4868. This will push the deadline to October 15. However, note that the extension only applies to filing taxes, not payments.

Knowing what happens if you miss the tax deadline is often enough motivation for taxpayers to put systems in place to avoid future issues.

 

Greenberg Law Group P.A. Is Here to Help

Greenberg Law Group, P.A. is your go-to partner for tax matters! We understand the process and can communicate with the IRS on your behalf, ensuring that each step is tailored to your specific tax situation. If you didn’t hit the tax deadline and want to find the best solution to the problem, a well-thought-out strategy and effective communication are essential. This is where a tax attorney can help! Reach out to us today, and we’ll help you get your taxes in order, reducing stress and providing you with more peace of mind.

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What Are Back Taxes? Tax Debt Tips and Resources

Back taxes are owed by taxpayers who have not paid their taxes for one or more previous years. Individuals and businesses with unpaid taxes will face various consequences, which, if not addressed promptly, can lead to more complex tax issues, such as levies. 

In today’s article, we’ll go over back taxes in more detail and how you can resolve back taxes and manage tax debt more effectively. 

 

Understanding Back Taxes

What Are Back Taxes?

Back taxes refer to tax debts that have not been fully paid when they were due. People often have back taxes for various reasons, including missed payments, incorrect income reporting, and incorrect deductions. 

The consequences of having back taxes vary and can be severe, depending on the specific situation, including the amount owed, the duration of the unpaid debt, and whether any actions have been taken to address the issue.

Common Reasons People Owe Back Taxes

Misreporting income or deductions: Misreporting income or deductions is a common cause of owing back taxes. While these errors may be unintentional at times, such as misinterpreting the qualifications of deductions, the IRS will remain firm in its assessment. Discrepancies in this matter may result in an audit and/or penalties being imposed. 

 

Unexpected tax bills from self-employment or side gigs: Back taxes can also result from tax bills from self-employment or side gigs. Unlike traditional employment, where taxes are withheld from paychecks, self-employment, such as freelancing or owning a small business, requires proactive tax compliance. Failure to do so may result in unexpected liability when annual returns are filed, leaving many unprepared.

 

Withholding errors from paychecks: Withholding errors occur when the amount withheld from your wages for taxes does not cover your entire tax bill. As a result, you will still owe the government money. Errors can occur when filing the W-4 form, such as claiming too many allowances or, on the employer’s side, miscalculating the amount withheld. 

 

Failing to file tax returns: One of the most common reasons taxpayers find themselves owing back taxes is failing to file their tax returns, often because they overlook this duty or assume the authorities won’t notice. However, that is not the case. When a return is not filed, the consequences are swift and can be detrimental to one’s financial well-being. 

 

Couple sitting with documents scattered on floor with calculator and credit card

 

How Back Taxes Impact Your Financial Future

Back taxes can add up quickly due to penalties and compounding interest. Furthermore, failing to resolve your tax issues, such as owing back taxes, can result in more complex problems, including wage garnishment, liens, or levies. 

Facing any of these issues will cause significant stress, as you will be under pressure to pay debts. If you are experiencing such complications, act promptly, as ignoring them will only lead to further problems. Explore the various options available to taxpayers and consult with a tax attorney to determine the best solution for your case. 

 

How to Resolve Back Taxes and Manage Tax Debt

The IRS provides several options for resolving back taxes and managing your tax debt effectively. One step taxpayers can take is to file past-due tax returns, even if paying them in full is not possible. Submitting returns can prevent some penalties and demonstrate goodwill toward the IRS. 

You can then explore other options for paying your debt, such as setting up a payment plan, like an Installment Agreement, which allows taxpayers to pay off debts over time. Another option to consider is an Offer in Compromise (OIC), which allows you to settle your debt for less than the amount you owe, provided specific requirements are met. 

Lastly, reviewing your tax debt with a professional can help you identify the problem, pinpoint errors, and uncover any deductions and credits you may have overlooked. 

 

Resources and Support for Tax Debt Relief

IRS Resources and Taxpayer Assistance Programs

Dealing with tax debt can feel overwhelming, but numerous resources and support options are available to help alleviate the financial strain. The IRS offers several free tools and programs to help you deal with tax debt, including ways to verify your outstanding balance. 

 

When to Seek Professional Tax Debt Help

Man shaking hands with a professional tax attorney in his office

If you are experiencing serious tax complications or have difficulty understanding or dealing with any tax issue, consult a professional tax attorney to help guide and resolve the problem. 

A tax attorney understands what is at stake in every tax situation, so they know precisely how to respond and what steps to take. Having a professional by your side can help you understand the options, choose the best solution, and avoid future issues. 

 

Avoiding Future Tax Debt Issues

Everyone should strive to avoid tax problems. To prevent future tax debt issues, file your tax return on time and fill out the correct form with accurate information. 

If you cannot pay your tax debt in full, consider the various options available and consult a professional to help you choose the best path for your situation. Remember that individuals and businesses are required to pay taxes, and avoiding taxes should never be an option because the longer you ignore your tax obligations, the more complicated the problems will become. 

If you need help with your taxes, contact Greenberg Law Group. Don’t put off paying your taxes. There are deadlines to meet, and failing to do so will result in more trouble. Let us help you get on the right track and avoid any tax issues.

 

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Tax Scams Aimed At High-Income Filers

Scams are common in many industries, including taxes. While the IRS remains vigilant against tax scams, scammers continually seek new ways to defraud individuals, particularly those with high incomes. 

In this article, we will look at the different tax scams to be aware of and how to protect yourself from them.

 

Common Tax Scams to Be Aware Of

1. IRS Impersonation Scams

The first common tax scam to be aware of is scammers impersonating IRS agents and demanding payment of taxes. These impersonations are typically carried out via phone calls or notices, with threats of arrest or deportation used to pressure taxpayers into paying taxes as soon as possible. 

They also frequently demand payment via methods that are difficult to trace, such as wire transfers and debit cards. Furthermore, scammers are known to request social security numbers, which can lead to identity theft. 

If someone calls or sends you a notice on behalf of the IRS, always verify the information before sharing it or making any payments. Contact the IRS immediately to confirm the correspondence you have just received. It is important to note that the IRS typically contacts taxpayers via mail first and does not issue threats. 

 

2. Phishing and Email Scams

Email scams are another popular method scammers use to obtain personal and financial information. Clicking any links or responding to these scam emails may result in identity theft and unauthorized access to your finances. 

To distinguish between genuine IRS emails and scams, verify the domain (which should end with.gov) and pay attention to the tone and spelling errors. Be wary if the writing contains errors and the tone is especially urgent, demanding immediate action. 

The IRS does not initiate contact via email or text to request personal or financial information, except in rare cases such as criminal investigations, and only with your permission.

 

3. Charitable Remainder Annuity Trusts (CRAT)

Man holding a pair of glasses wearing a watch and holding a paper document

A Charitable Remainder Annuity Trust (CRAT) is an irrevocable trust in which the donor establishes the trust and donates assets to it. The trust allows you to withdraw annual income from the trust for a specified period. 

Scams involving CRAT typically rely heavily on marketing to structure a CRAT with a “too good to be true” outcome, often promising taxpayers a magic tax eraser. CRATs are legitimate estate planning tools, but they do not eliminate taxes. Instead, reduce them while adhering to strict rules. Be wary of anyone offering to structure CRATs, as this can lead to IRS scrutiny and complex tax problems.

 

4. Monetized Installment Sales

A monetized installment sale (MIS) is another abusive tax scheme used by scammers to defraud taxpayers. An MIS is a tax strategy whereby you sell a property or a business, with most of the payments paid upfront and the rest agreed to be spread out in installments for tax purposes. 

This typically involves a third party, such as a financial company, that takes over collecting the installment payments. Scammers use monetized installment sales to lure taxpayers with promises of quick cash and tax savings, but the deals are structured in violation of IRS regulations, resulting in significant fines while the scammers walk away with a substantial sum of money. 

 

5. Art Donation Fraud

Tax evasion through art donation is a common fraud that targets high-income individuals. In this scam, the promoter persuades taxpayers to purchase artwork at a discounted price and then have it appraised by a shady appraiser working with them to raise the price. 

Taxpayers then donate the artwork to claim a tax deduction. The scammer could receive a cut for setting it up, while taxpayers are misled into believing they are getting a good deal and a legitimate tax deduction when, in fact, they are not. 

 

How to Protect Yourself from Tax Scams

Protecting yourself from tax scams requires diligence and vigilance. These scams often prompt taxpayers to take action immediately, and the deal is usually too good to be true. As a result, any correspondence that appears to be from the authorities should be treated with extreme caution. Take a step back and confirm with the IRS if you receive any suspicious messages. 

Recognizing red flags is also critical to avoiding scams. If you remember the warning signs of these scams, you will know how to keep the situation from escalating. Furthermore, report any scams you encounter to the authorities so that action can be taken. 

Always remember that the IRS has specific guidelines for communicating with taxpayers. The IRS will first contact you via mail sent by the United States Postal Service, and you will not receive an unsolicited email or phone call. 

The IRS never threatens or requests immediate payment. They will give taxpayers time and options to meet their tax obligations. Payments requested will also be processed through official channels.

 

Steps to Take if You’ve Been Targeted or Scammed

If you have been targeted or scammed, please contact the IRS immediately and report the incident to them.

It is also critical to monitor your financial accounts regularly to detect suspicious activity. If you have been scammed, scammers may have your personal and financial details. If you notice any suspicious activity, notify your bank and freeze your account.  

Working with a tax attorney is one of the most effective ways to prevent and protect your finances from tax scams. A tax attorney can help you understand everything there is to know about taxes. If you want to reduce your tax burden legally, a professional can help you. 

The best way to avoid tax trouble is to understand your tax obligations and explore your options for managing taxes and addressing any issues that may arise. 

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Why High-Income Filers Should Work with a Tax Attorney

If you are a high-income filer, tax scams are looking to target you. Remember that tax scams can result in substantial financial losses and potentially serious legal consequences. 

As previously stated, a tax attorney can help protect you from tax scams and ensure that your hard-earned profits are channeled through legitimate channels when fulfilling your tax obligations. 

Contact Greenberg Law to start protecting your tax processes and ensure a smooth tax experience!

 

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How to Pay Florida Taxes Owed

Florida is known for being tax-friendly because it has no state individual income tax. Having said that, Floridians are still subject to state and federal taxes that must be paid as part of being a law-abiding citizen. So, what are they, and how do you pay Florida taxes owed? Let’s get right into it. 

 

Common Types of Florida Taxes You Might Owe

If you are a resident of Florida, you may have to pay the following taxes:

Sales and Use Tax: A sales tax is added to the price of taxable goods and services. When sales tax is not paid during the purchase, a use tax is levied on using or consuming taxable goods and services.

Florida has a state sales tax of 6%, with the following exceptions: retail sales of new mobile homes (3%), receipts from amusement machines (4%), rental or lease of commercial real estate (2%), and electricity (6.95%). 

 

Property Taxes: The state does not impose a property tax; local counties and municipalities administer property taxes based on real estate value. 

 

Tangible Personal Property Tax: A TTP tax, or tangible personal property tax, refers to goods and property other than real estate that an owner can physically possess and have intrinsic value, such as inventories and household items. The tax applies to anyone who owns a business (proprietorship, partnership, or corporation), self-employed individuals, or rental property. 

The rates are based on local mileage, which varies by county and municipality. 

 

Florida Corporate Income Tax: This applies to corporations, and Florida’s corporate income tax is set at 5.5%. 

 

Tourist Development Taxes: The ‘Bed Tax’ applies to tourism-related businesses such as rentals and accommodations that rent or lease their properties for six months or less. The tax rates vary by county. For example, Sarasota County’s rate is 6%

 

Steps to Pay Florida Taxes Owed

Calculator that says 'tax-time' sitting on top of tax documents with cash, coins, and a pen next to it

Step #1: Understand How Much You Owe

The first step in paying Florida taxes owed is determining which taxes apply to you and calculating the amount owed. You can check your tax bill with the Florida Department of Revenue (DOR) or a county tax collector. Once the amount has been confirmed, proceed to the second step of reviewing the available payment methods. 

 

Step #2: Review Payment Methods Available

Florida taxpayers have several options for paying their taxes. The first option is to pay online through the Florida Department of Revenue’s website. Note that some counties may only offer an online payment system. Therefore, check with your local counties for more information.

The second option is to pay via mail. Ensure you have the correct form and enter the correct information, such as the tax account number and address on your tax bill. 

If you prefer to pay your taxes in person, you can do so at the Florida Department of Revenue or county tax collector offices. Contact them to confirm which types of payment are accepted. 

 

Step #3: Set Up a Payment Plan if Necessary

Consider a payment plan if you cannot pay off your tax debt in full. A payment plan allows you to pay your tax debts periodically, which can help you manage your debts and finances. It is critical to understand that you should not sit back and do nothing if you cannot pay your tax debts. 

Consider the options provided, contact the IRS, or seek professional advice from a tax attorney. Ignoring to pay off your debt will result in increased scrutiny and complicated tax issues, such as enforcement actions and levies. 

Gold coins stacked up with blocked that spell 'TAX'

Step #4: Pay Using Electronic Funds Transfer (EFT) for Large Balances

The Florida Department of Revenue (DOR) encourages businesses and individuals with large tax bills to pay using Electronic Funds Transfer (EFT). 

An EFT allows you to transfer funds directly from your bank account, which reduces processing time while ensuring secure and timely payments. This payment method is also recommended for those with recurring payments, such as installment agreements. 

 

Step #5: Pay Through the Florida Taxpayer Services Portal

The Florida Department of Revenue website provides an online payment system that enables taxpayers to pay their taxes directly through the portal. First, visit the website and select “make a payment.”  

Next, log in to your account and select the type of tax you need to pay. Then, choose a payment method and submit your request. The Florida Taxpayer Services Portal offers a secure and efficient payment method.   

 

How Greenberg Law Group Can Help You With Florida Taxes

If you require professional tax assistance, please contact our team at Greenberg Law Group. We provide individual and business tax services, including tax relief and resolution, advice on avoiding future tax issues, tax filing and submission preparation, IRS negotiation, and other tax-related services. 

Greenberg Law Group’s professional tax assistance will help you feel more confident and at ease when navigating and dealing with various tax issues and preventing future tax-related problems. Contact us today, and we’ll get to work right away. 

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I Owe Over $50,000 in Tax Debt. What Should I Do?

Are you scrambling over papers looking for information and worried about the consequences of owing more than $50,000 in taxes? Rightfully so. If you owe more than $50,000 in tax debt, this is not a minor issue and should not be overlooked. Read on to find out what you can do if you owe over $50,000 in tax debt.

 

Understand the Consequences of Large Tax Debt

Owing a large sum of money is not a good situation. Tax debt of more than $50,000 is considered a serious delinquency and may result in aggressive collection efforts.

 

The IRS can take a variety of steps to collect the amount owed: 

Tax lien: the IRS places a claim on your assets. 

Wage garnishments: A portion of your paycheck will be automatically withheld. 

Bank levies: The IRS seizes money directly from your account.  

Passport revocation: You may lose your passport privileges if you owe over $54,000. 

 

As you can see, owing more than $50,000 in tax debt is serious. To prevent the situation from escalating, immediate action is required. More about this later in the article. 

 

Review Your Tax Debt & Confirm the Amount

pile of $100 bills sitting with white background

Instead of simply accepting the IRS’s tax debt amount, it is always a good idea to review and confirm it yourself to ensure its accuracy. 

 

How to Verify Your Tax Debt

First, check your mailbox for IRS letters or notices and understand their contents. Look for any official IRS correspondence indicating a balance due. It is critical to remember that if you receive an official letter from the IRS, do not ignore it. 

Next, access your IRS account by going to the IRS website and logging in. You can find your tax balance, payment history, and any outstanding liabilities here. 

You should also check your previous tax returns to ensure they were properly filed and paid. To identify discrepancies, compare the IRS figures to those on your filed returns.

Another option is contacting the IRS directly with any tax-related questions or clarifications. To make the process go more smoothly, have all your information ready, including your social security number and relevant tax documents.

The steps to verify your tax debt are a process in their own right, and accuracy and effective communication are critical. Hiring a tax attorney is vital in ensuring a successful verification process.

The benefits of seeking professional assistance include understanding the problem, identifying inaccuracies or discrepancies, communicating on your behalf, and exploring the best solutions.

 

Explore Your Tax Debt Resolution Options

The good news is that the many options available to taxpayers can resolve most tax issues.

 

Installment Agreement (Payment Plan)

hand holding a yellow highlighter circling date on calendar that says 'pay off debt!'

An Installment Agreement (IA) is a payment option whereby taxpayers can pay off their debt in periodic installments (usually monthly). This way, you can manage your debt and ease your financial pressure. 

Note that there are many types of Installment Agreements. When you owe over $50,000, you can have a streamlined or non-streamlined installment agreement. 

Learn more by reading our piece about IRS Installment Agreements. 

 

Offer in Compromise (Settle for Less Than You Owe)

An Offer in Compromise lets you settle your tax debts for less than you owe. The IRS provides this program with many types of OIC designed to help taxpayers facing various financial issues.

For example, the Doubt as to Collectability (DATC) option is available if you cannot pay your entire tax debt. If the IRS finds reasonable doubt, you may be allowed to pay your debt for a lesser amount. 

 

Currently Not Collectible (CNC) Status

Currently Not Collectible (CNC) Status is available for those who cannot afford to pay off debts without causing significant hardship. For example, if you cannot fulfill basic living expenses, the IRS can put you on a CNC, delaying any collection process. 

However, it is essential to remember that qualifying for a CNC does not mean your debt goes away. 

 

Penalty Abatement & Interest Reductions

If you fail to pay or file by the deadline, you may be able to reduce or eliminate penalties based on your situation.

For example, if you have a clean record and a good compliance history, you may be eligible for the first-time abatement program, which reduces or eliminates your interest payments. If you qualify, this type of debt relief can be applied regardless of the size of your penalty.

Other options include Reasonable Cause Penalty Relief, which waives certain penalties if there is reasonable cause, such as serious illness that impairs your ability to file or pay taxes, natural disasters, or civil disturbances that prevent you from filing a return or making a tax payment, and inability to determine the amount of tax due for reasons beyond your control.

 

Bankruptcy (Last Resort Option)

Filing for bankruptcy can discharge certain tax debts. However, the requirements are strict. For example, the debt must be at least three years old, and the tax return must have been filed at least two years ago. 

Bankruptcy should only be used as a last resort to resolve tax debts. This is because filing for bankruptcy can have long-term financial consequences, such as a negative impact on your credit, difficulty obtaining loans, employment challenges, etc. 

 

Why Hiring a Tax Attorney is Crucial

Tax files all organized with labels

If you owe over $50,000 in tax debt, you should resolve the issue immediately and get everything right the first time. This includes thoroughly understanding the problem and the available options, selecting the best options, and accurately applying for the best solution.

In these cases, hiring a tax attorney is an excellent option. As an expert in the field, a tax attorney can assist you at each stage. For example, a tax attorney can effectively negotiate with the IRS to reduce debt and halt aggressive collection efforts. 

Furthermore, professionals can help you determine the best resolution strategy for your situation, ensure that all steps are taken according to IRS requirements, and avoid future tax issues. 

A tax attorney is your best resource for defending your rights and financial interests. If you have complex tax problems, seek professional help. 

 

Hire Greenberg Law Group, P.A. Today!

Greenberg Law Group recognizes that certain tax issues, such as owing more than $50,000 in tax debt, are serious matters. Because we understand the complex issue, we know that it must be addressed effectively and timely. 

Greenberg Law Group can guide you through responding to the IRS, contracting and negotiating with the authority, and selecting the best resolution that meets your needs and end goals. Do not wait until it is too late. Contact Greenberg Law Group today, and let’s start resolving this issue!

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Can The IRS Freeze My Bank Account?

The IRS has the obligation to ensure that all taxpayers comply with the country’s current tax regulations. In doing so, it’s given the authority to pursue tax debt owed by taxpayers through various means, including freezing your assets. 

So, how does the IRS go about doing this? And what kinds of situations prompt the tax authorities to do so? Keep reading to learn more. 

 

How the IRS Can Impact Your BankAccount

What Does It Mean for the IRS to Freeze Your Bank Account?

Can the IRS freeze my bank account? Yes, they can. A bank account freeze or levy is when the IRS places a legal hold on your account, preventing you from accessing your funds until they are lifted—usually when you have agreed with the authority to settle your debt. Sometimes, the IRS may use your bank funds to cover your debts. 

 

Why Would the IRS Freeze My Bank Account?

The IRS can freeze your bank account for a variety of reasons. The most common trigger is unpaid taxes. If taxpayers fail to pay their debt, collection action may begin, including freezing a bank account. 

Failure to respond to IRS requests may also result in a levy. When a taxpayer has unpaid taxes, the tax authority sends numerous notices, reminding the taxpayer of the problem and offering various options for settling the debt. Ignoring these notices and not complying with the requests will result in scrutiny.  

Noncompliance with payment agreements is another reason the tax authority may freeze your bank account. If you fail to pay the debt by the agreed-upon deadline, further action, such as a levy, may be imposed.

Businessman dressed in suit reaching to put money in piggy bank

How the IRS Can Legally Freeze Your Bank Account

The IRS must follow certain procedures before conducting levies. First, it will send several notices informing taxpayers of the problem, demanding payment, discussing available options, and outlining what actions can be taken if they refuse to comply. 

The IRS will also provide timeframes for action. For example, if you’ve received a final notice, you typically have 30 days to respond before the IRS can legally levy your bank account. A Federal Tax Lien may also be issued to legally claim your asset and notify creditors. As previously stated, the authority may use your bank account funds to secure the debt. 

 

How to Prevent the IRS from Freezing Your Bank Account

Tip #1: Respond to IRS Notices and Communications

Responding promptly to any IRS notices and communications is crucial to preventing a bank freeze. Pay attention to the details in the message and ensure your response meets the IRS’s requirements and is completed by the specified deadlines.

 

Tip #2: Pay Your Tax Debt in Full or Set Up a Payment Plan

The best way to avoid problems with the tax authorities is always to pay your tax debt on time. The IRS will not look for trouble if none exists. If you cannot fully pay your debt, options like a payment plan are available. 

You can pay in installments or reduce your tax debt, depending on your situation. Understand the various options and what requirements must be met to ensure a smooth and successful process.  

 

Tip #3: Apply for an Offer in Compromise

An Offer in Compromise (OIC) is one good option for those having trouble paying off their full tax debts. With an OIC, a taxpayer can settle the debt for less than what is owed. To qualify for an OIC, one must demonstrate that they cannot repay the debt or that doing so would cause significant economic hardship.

Read our Offer in Compromise piece here for a more in-depth look at an OIC. 

 

Tip #4: Request a Collection Due Process Hearing

Taxpayers have the right to a Collection Due Process (CDP) hearing. If you disagree with the IRS decision, whether the amount of debt imposed or the decision to levy, you have the right to challenge it. 

Submit IRS Form 12153, Collection Due Process Request, within 30 days of receiving the Final Notice of Intent to Levy. This will immediately halt the levy process until the dispute is decided. Ensure you don’t miss the 30-day deadline, as this is a very strict requirement, and you risk losing your right to a CDP. 

 

Tip #5: Demonstrate Financial Hardship

If a taxpayer can demonstrate genuine financial hardship, the IRS can offer options such as a Currently Not Collectible (CNC) status, which immediately pauses collection actions. 

For example, the levy will be lifted if the IRS freezes your bank account and causes immediate economic hardship, such as preventing you from paying rent, utilities, or food.

However, your tax debt will remain if you qualify for a CNC and the levy is lifted. During the pause, explore the payment options to manage your tax debt and prevent the issue from escalating.

two people sitting on the floor criss-crossed with a lot of papers surrounding them

What to Do If the IRS Freezes Your Bank Account

Contact Your Bank and IRS Immediately

If the unfortunate event of a bank freeze occurs, contact your bank and the IRS immediately. Call the bank to confirm the situation and ensure that any actions are legally compliant. 

Communicate with the IRS about your situation and choose one of the options available to you. Don’t wait in this dire situation. The longer you wait, the more trouble you’ll get in. If you’re unsure what to do or how to communicate, seek professional help. 

 

Seek Professional Tax Help

Communication with the IRS requires the right language and accurate responses. Solving a complex issue, such as tax problems, can be daunting and, if not done correctly, can lead to additional trouble and stress. 

Contact a tax attorney to assist you with any tax issues to ensure proper communication, requests are fulfilled and completed accurately, and the outcome is as desired. This is where contacting Greenberg Law Group becomes the best option. Our legal team can effectively guide you through this complex situation.

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