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By Michael S. Anderson of Anderson Tax Law logo for Arizona tax attorney Michael S. Anderson P.C.
  • When the IRS audits, adjusts or files a substitute tax return, pay close attention to deadlines

    IRS Audit?  Pay close attention to deadlines, they mean something

    A great number of Americans owe the IRS at any given time.  Some estimates are as many as 10-15% of all taxpayers owe…right now.   The most common reason I see a consumer owing tax, is the most obvious one; the taxpayer just didn’t withhold enough or pay enough during the year or at the time the return was filed.  There are other reasons though that cause the tax bill to be a surprise to many like:

    • The IRS audits the return and the taxpayer ends up signing the audit report and agreeing to the amount
    • The IRS audits the return, the taxpayer appeals the audit assessment and loses the appeal but doesn’t file tax court petition.  The tax bill then becomes a final bill.
    • The IRS audits the return, the taxpayer doesn’t agree but also doesn’t appeal or file a tax court petition.
    • The IRS audits the return, the taxpayer appeals, files a tax court petition and still loses and therefore owes.
    • The taxpayer files what he believes is a correct return but the IRS later adjusts the return as a result of missing income.
    • The IRS filed a tax return for the taxpayer called a substitute return, the taxpayer doesn’t appeal timely, and sent the taxpayer the bill.

    The problem with every one of these scenarios is that at the end… the tax debt is set in stone.  I.E.  challenging the amount internally becomes very difficult if not impossible.  Also, once the debt is assessed and a notice period passes, the IRS doesn’t need court approval to take a paycheck or bank account.  It can seize assets, record a notice of tax lien that will destroy a credit rating,  and tack on penalties and interest to the debt.

    The point of this post is to show you how tax debt is created, so that you can take to heart the following advice if any of the above happens to you:

    Don’t allow deadlines to pass.  The failure to respond timely and properly can result in a debt that may not actually be correct.  I see this constantly and am dismayed about how often it could have been avoided.