There are many reasons why taxpayers find themselves with tax problems and on rare occasions it is due to criminal intent. However, the majority of tax problem resolution cases we deal with are caused by some serious event that occurred in the taxpayer’s life. Here are five events that can lead to tax problems.
Divorce
We know that a divorce can be an extremely emotional, stressful and unhappy time. It can also cause unwanted and unexpected tax problems. For example, sometimes a spouse who receives alimony is unaware or forgets the payments received are taxable.
A divorce agreement may provide that one spouse will pay for any outstanding joint tax liabilities or additional taxes assessed upon audit of a previously filed joint return. However, the IRS is not bound by the agreement and will attempt to collect from either spouse or both. This comes as an unpleasant surprise to many taxpayers.
Medical Problems
When taxpayers or their families are faced with serious medical problems, filing returns and paying taxes are often not a priority. A medical problem can be overwhelming from a time and financial perspective. Although a taxpayer may earn a reasonable living, there are times when health costs can spiral out of control. You shouldn’t be expected to choose between paying your taxes or undergoing a necessary medical procedure for yourself or a family member.
Loss of Employment
Unexpected tax problems can arise when a taxpayer loses his/her job or they become underemployed. If you lose your job and begin collecting unemployment, you may decide not to have tax withheld as you need every dollar to pay your living expenses. When it comes time to file your tax return you find you have a balance due. Unfortunately, you may still be unemployed or still trying to recover financially from the period of unemployment.
Another scenario we see quite often is a taxpayer withdrawing money from their retirement account or IRA while unemployed and failing to withhold sufficient income taxes. This can easily create thousands of dollars in unpaid taxes.
Poor Financial Judgment
Tax problems can also result from taxpayers who demonstrate poor financial judgment. For example, when it comes to home ownership taxpayers may make a bad decision and purchase a home they cannot afford.
Another example of poor financial judgment is running up credit card debt at high interest rates thinking your financial situation will change, and you’ll be able to pay the credit card companies off. However, when you use your credit cards to live beyond your means you’ll find your debt continuing to grow and may prevent you from fully paying your taxes.
Business Downturn
A business owner experiencing a downturn and the cash flow problems that come with that downturn may make the poor decision and not send the IRS the withholding taxes from the employees wages. The owner typically thinks the business problems are temporary and that the payroll tax payments can be caught up in the very near future. Unfortunately, in many cases this simply does not happen and the unpaid payroll taxes mount up very quickly with substantial penalties and interest adding to the tax problems.
The IRS will attempt to collect the unpaid payroll taxes from the business and the trust fund portion directly from the owner. If necessary the IRS will take enforced collection activity such as levies and seizures.
Resolving Tax Problems
No matter what caused your tax problems, the Boca Raton tax resolution experts at East Coast Tax Consulting Group will find a solution that will put an end to your back tax issues. Call us today at 866-550-7655 to schedule a free consultation. We help taxpayers in South Florida and throughout the country.