Who’s Afraid of the IRS

The service is the most aggressive and hostile collection agency in the world, and they work hard to cultivate that image.  IRS criminal investigations are on the rise and big business these days. If you owe money or have not filed your returns, you should be afraid of the IRS.

First and foremost, non-filers should be afraid of the IRS.  If you have not filed your tax returns for 2, 5, or even 10 years, it’s just a matter of time before the IRS catches up with you.

No matter how long you’ve managed to stay hidden, there will be a day of reckoning.  Someone will issue a 1099, W-2, CTR, capital gain or interest income statement, or some other form that gets to the IRS.  Then, someone will be assigned to find you and your assets.

Are You A Non-Filer?

To non-filers, I say get your returns filed, come out of the shadows, have that day of reckoning on your terms, not whenever the IRS gets around to it, and don’t be afraid of the IRS any longer.

Another group that should be very afraid of the IRS is those with unreported offshore bank accounts or offshore corporations.  The U.S. is on the warpath against hidden assets and would love to put you in jail for failing to comply.

• While it is rare for un-filed returns to land you in jail, there are many locked in boxes for not reporting their foreign income.

If you have unreported offshore accounts, you should consider joining the IRS Offshore Voluntary Disclosure Program.  If you are living abroad, you might avoid all penalties.  If you are living in the U.S., then you can eliminate the risk of jail.

For more information, take a read through this post on the IRS Offshore Voluntary Disclosure Program.  They are an excellent free online resource.

Another group that should be afraid of the IRS is those with unreported or under-reported (domestic) income.  If you’ve filed your returns but did not fully report your income, you should be afraid of the IRS.  Though, to a lesser extent than those with unreported offshore income.

As a rule of thumb, I suggest that, if you under-reported your income by 20 – 25%, you should be afraid of the IRS.  If you under-reported your income by 50% or more, you should be very afraid.  At these levels, additional penalties apply and criminal charges could become possible.

At lower levels, you might not want to amend your return to correct an innocent mistake.  The smaller the error, the less I’d want to draw attention to the return.

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Remember that the IRS usually has 3 years to audit your return.  If you catch a minor issue on a 2-year-old return, you might let it ride.

The last group that should be afraid of the IRS is anyone with a tax debt older than 30 days.  If you filed a return with a balance due or received a notice from the IRS saying you owe money, you should take action to defend yourself within 30 days.  The longer you wait, the more afraid of the IRS you should become.

This is especially important if you received a letter by certified mail.  Once that notice, called a CP504, is sent to your last known address, then you have 90 days to resolve your tax debt.  If you don’t get it handled on time, the IRS has the right to levy your bank accounts, garnish your wages, and seize your property.

I hope you’ve found this article helpful.  Remember that the best way to stop being afraid of the IRS is to file your delinquent returns and get an expert in your corner to deal with the IRS on your behalf.

What’s Next?

Let’s face it, taxes for expats and the offshore markets is specialized information that your mom and pop accountant down the street is not going to understand. Speak with our CPA if you are serious about reducing your tax obligations and always staying compliant – click here to find out more.

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