Common Questions Asked by Louisiana Taxpayers with IRS Problems [Part II]

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This is the second installment of our two-part blog post, which is intended to answer many common questions posed by those with IRS problems.  We recommend that you read Part I before reviewing this information.

Since I cannot afford to pay my taxes, I assume it would be better not to file a tax return and draw attention to my non-payment?

This is a misconception that many people make when they know that they have no ability to pay their federal income taxes.  The penalties for non-filing are extremely harsh so you should always file your federal tax return even if you cannot afford to pay the taxes.  Anyone who does not file a federal tax return is subject to a penalty of five percent per month until a maximum of 25 percent is reached.  The statute of limitations that bars enforcement through collection procedures also does not begin to run until you have filed your return.

How should I handle an audit?

While notice of an IRS tax audit can strike fear in the hearts of many, proper preparation and legal representation can help you prevail.  When you discover that you must participate in an audit, you should contact an experienced New Orleans tax law firm, which can evaluate what specific issues the IRS is raising.  A tax lawyer can help you prepare the proper documentation to address the issue and make sure that the proper legal basis for your position is asserted.  Although you should take a tax attorney to your audit to assist you in presenting your position, you also need the tax attorney to shield you from providing too much information that opens the door to new issues that were not initially raised by the IRS representative.

Should I file a tax return even though I do not owe any tax and will not receive a return?

An important rationale for filing a tax return is to trigger the start of the statute of limitations.  The IRS can pursue an assessment and try to collect underpaid tax many years after the year that the taxes were due.  If you do not file a tax return, you cannot use the statute of limitations to protect you from this scenario.

Can the IRS garnish my wages or put a lien against my real estate for a tax debt that my husband owed before we were married?

If your spouse incurred the tax debt prior to marriage, the IRS cannot file a wage assignment against your paycheck and generally cannot place a cloud of title on a home that you owned prior to marriage.  However, you need to be careful about filing a joint tax return with your spouse because the IRS may intercept your tax return.  The IRS can seize the entire amount of the refund even the portion attributable to your income.  While you may be able to petition to get your portion of the refund back, this is a situation that you are better off avoiding in the first place.  It is also possible that you can place assets in jeopardy if they are titled jointly.  If you have concerns about structuring your financial affairs to provide protection from your spouse’s tax debt, you should speak with Mr. Grego about particular actions that should be avoided.

If you have other IRS tax questions, you should contact experienced Louisiana tax attorney Paul A. Grego.  We offer a free initial consultation so that we can answer your questions and provide an initial assessment of your situation.  Call us today at 504-302-4949 or email us.

Common Questions Asked by Louisiana Taxpayers with IRS Problems [Part I]

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The IRS represents the most brutal debt enforcement agency in the country with the power to seize your assets, place liens on your real estate, close your business, garnish your paycheck and otherwise cause financial chaos and hardship in your life.  While many fear the IRS, they do not take aggressive action to fight the powerful federal agency because they presume that the agency generally does not proceed on an illegitimate basis when auditing taxpayers or employing tax enforcement remedies.  Given the recent reports about the abusive tactics of certain IRS officials, taxpayers should have more motiviation than ever to take on the federal taxing agency.

New Orleans Tax Attorney Paul A. Grego recognizes that the best way to empower taxpayers to fight back is to arm them with the information they need to understand their legal rights and options.  Mr. Grego has provided answers to general questions that may be relevant to those who face a multitude of IRS issues including the following:

  • Failure to file tax returns
  • Unpaid tax
  • IRS enforcement tools
  • Audits

Can the ability of the IRS to enforce a tax debt through a wage assignment or other remedies be barred by the statute of limitations?

The statute of limitations for enforcement of tax obligations is ten years from either the date the return was due to be filed or the date the return was filed whichever occurred later in time.  However, this period can be extended if you request an offer in compromise or file bankruptcy.

Are federal income taxes subject to bankruptcy discharge in Chapter 7 or Chapter 13?

If three years have passed since the taxes were due or filed (whichever is later) before you file Chapter 7 or Chapter 13, the taxes usually will qualify for bankruptcy discharge.

May the IRS arrest me for owing unpaid taxes?

Generally, the failure to pay income taxes is not a crime though intentionally lying or misrepresenting your income and expenses may be a criminal act.  If you are concerned about potential criminal liability for an IRS issue, you should immediately speak to an experienced New Orleans tax lawyer.

Are there any potential adverse personal income tax consequences if I short sale my home or exercise a deed in lieu to avoid a foreclosure on my credit report?

If you are considering this type of foreclosure alternative because you cannot pay your mortgage, it is important to consult with a Louisiana tax attorney because the IRS may pursue you for cancellation of indebtedness income.  This can leave you in a much worse position than foreclosure because the IRS has much more powerful tools for enforcing a debt than mortgage lenders.

If you have additional questions about IRS issues, we invite you to read Part II of the FAQ blog.  If you have more specific tax questions, you should contact experienced Louisiana tax attorney Paul A. Grego.  We offer a free initial consultation so that we can answer your questions and provide an initial assessment of your situation.  Call us today at 504-302-4949 or email us.