The Law Offices of Arnold van Dyk

What Tax Issues Does Your Firm Currently Handle In California?

The main focus of my firm is tax litigation. We represent individuals and businesses in US Tax court and deal with tax disputes, releasing levies and wage levies, tax liens, filing off on compromises, tax debts, innocent spouse claims and worker classification claims.

What Are The Common Reasons That Individuals Or Businesses Are Faced With Tax Issues?

One reason that individuals and businesses end up owing the IRS is because they fail to make estimated tax payments. This generally causes a snowball effect whereby the person or business ends up owing the IRS at the end of the tax year and they don’t have the funds to pay the balance. When this process repeats itself over multiple years, the individual or the business can end up owing large amounts of money to the IRS. Another reason is because businesses will misclassify employees as independent contractors. If the IRS deems them employees, then the penalties for not paying employment taxes can be very severe. Lastly, if a business or individual is being audited, lack of documentation to substantiate the expenses claimed on the tax returns can lead to tax issues. This is why it’s very important for individuals and businesses to keep documentation of all expenses during a tax year.

What Are The Common Ways That An Attorney Can Help To Resolve Tax Debt?

Tax debts can be resolved in various ways. The first is by setting up an installment agreement. If you owe the IRS less than $50,000, they’ll generally accept an installment agreement as long as you pay off the balance within six years. If you owe the IRS more than $50,000, it is still possible to set up an installment agreement, but they will usually require financial information (bank statements, profit and the loss statements, etc.) in order to determine if you qualify for an agreement or if you are able to pay the balance in full.

Another option for resolving tax debt is to file an offer in compromise and attempt to settle the balance due for a lesser amount. With an offer in compromise, the IRS will take into account all of your assets and monthly disposable income after allowable expenses. If you are able to document that your collection potential is less than the amount owed, then the IRS will settle for a lesser amount. An offer in compromise program is based purely on collection potential. For example, if you have equity in assets- such as a house, boat or retirement fund- that can pay the balance in full, then the IRS will generally not settle for the lesser amount. There are some exceptions, but generally it is based purely on your collection potential.

Another option is what the IRS calls “currently not collectible status.” If you qualify for the not collectible status, then the IRS will not actively pursue collection against you, but they will generally file a tax lien. A tax lien will show up on your credit report so that if you sell a house or liquidate a retirement fund, the government can collect the proceeds that are owed to them. A payment plan is not required during the period of this status.

What Is A Tax Audit?

A tax audit is an IRS examination of your tax returns. There are various types of audits. The most common one is the correspondence audit, whereby the IRS will send you a letter requesting that you send in documentation to substantiate the auditing. These types of audits are not very intrusive since you are not contacted directly by the IRS. If the IRS is in disagreement with you, then they will send you a bill or proposed determination.

The second type of audit is an office audit, which is done in person, generally at the IRS Office. You need to bring your paperwork to an IRS examiner, and they’ll question you regarding your business and the deductions claimed. Then they’ll make a determination based on that information.

The third type of audit is a field audit. During a field audit, an IRS revenue agent will visit your business and look at your bank accounts to see if all income was reported. These are generally very intrusive. At the end of the audit, the IRS will make a determination and send you a proposal. These determinations can be appealed administratively within the IRS or disputed in the US tax court without paying the balance. Alternatively, you can pay the funds and file a refund suit in federal district court.

For more information on Tax Issues In California, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (714) 321-3369 today.

The Law Offices of Arnold van Dyk

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