Understanding Back Taxes, IRS Tax Liens and Assessed Income Taxes

Understanding Back Taxes, IRS Tax Liens and Assessed Income Taxes

A Practical Guide to Understanding Tax Issues with the IRS

Knowing and understanding the tax issues a taxpayer has with the Internal Revenue Service is the best first step to beginning to address old tax issues satisfactorily and to get back into the system. As a Body of Believers we are taught that fear is the beginning to understanding, and that understanding leads to opportunities to turn from our problems, repent and then to move forward. Though we might want to be beyond our problems, like in our lives, we have to deal with the consequences of our action and to be able to aggressively work to address problem areas and to put them behind us. I believe in the axiom that either "we are to aggressively deal with tax problems or know that the IRS and their collection process will aggressively deal with us."

Tax problems come in many varied forms and are cover many different segments of tax law including:

-Back Taxes. For taxpayers who have not filed their tax returns for the past several years the filing of these old back returns is often the easiest and quickest way to assess the obligations of IRS tax assessments. It is often in the review of past taxes that were either file or assessed that a CPA can learn of missed deductions and to legally amend past filed tax returns. This is one of the first and most important steps in the tax review process to ensure that our tax obligations to the IRS include only monies that are legally owed and do not include any tax bill amounts that are not legally owed. Our tax system expects taxpayers to pay only what they owe and it is up to CPA's and their clients to ensure that only their just tax amounts are listed as due and payable.

-IRS Tax Liens. A tax lien is lien placed upon a taxpayers real and personal property by a legal filing to secure and protect the IRS's interests. The tax filing is a result of a taxpayers neglect to pay their income or other taxes. Laws vary by state, but generally, if a lien goes unaddressed or unpaid for a period of time, the lien on the property may be used to either seize the property, foreclose or sold, such as at a tax deed sale. Tax liens generally remain in place until the tax obligations are either paid in full or abated, such as in an Offer in Compromise. Generally speaking tax liens are treated by the courts in the order of their initial filing, indicating their priority or perfection. Tax law requires that within thirty days of a tax issue being addressed and paid in full or waived, that the attendant lien is to released or removed.

-Assessed Income Taxes. Frequently the IRS will assess taxpayers monies based upon the Service not having received the tax returns, which a taxpayer was legally required to file. Absent any other contrary information the IRS is left to assume that the taxpayers owes the maximum amount of taxes based upon the income that was reported directly to the IRS. Often I have seen situations where a taxpayer, for example, has received a Form 1099-Misc. to report independent contractor income they may have earned. As the IRS has no other information on which to base the taxes due, they assign a tax liability based upon the gross amount of the revenue received, as the taxpayer has yet to file a return and to claim the legitimate business expenses incurred and paid. By this issue alone I have seen many tax return liabilities immediately reduced by tens of thousands of dollars by the simple filing of past tax returns and for back taxes.

John Dillard is a Christian Speaker/Author and Certified Public Accountant (All Rights Reserved). To See how he takes Christ along with him to work visit http://www.hiscpa.com/ (An Atlanta CPA firm) and for his latest book Overcoming Life's 9/11's: Job's Journey and to learn about his ministry visit http://www.john-dillard.com/