How can I achieve full tax compliance if I have back taxes?

How can I achieve full tax compliance if I have back taxes?

Most Americans have a duty to file taxes based on their level of income alone. Single filers under age 65 who earn more than $10,150 a year must file taxes even if no tax is due and owing. Likewise, a married couple filing taxes jointly has a filing obligation if their income exceeds $20,300. If one or more of the spouses is over age 65, a higher filing threshold applies. However many people believe that they simply don’t make enough money to attract attention from the IRS even if they fail to satisfy their filing obligation. The simple fact is that each failure to file could result in charges that could impose up to one year in prison. If the taxpayer attempts to conceal their past acts of noncompliance, they are likely to commit tax felonies and make their problems worse.

Working with an experienced tax professional can help you come clean about past tax mistakes and come back into the tax system. By disclosing you past problems you may have to pay some penalty, but provided that your action is well-considered you should face consequences that are significantly more favorable than those that typically follow a tax audit or prosecution.

A strategic disclosure can correct unfiled tax problems

When a taxpayer comes forward and reveals their past compliance issues voluntarily, the IRS will typically agree to not pursue a criminal tax investigation or will otherwise work out a deal with the taxpayer. However there are different ways you can go about making a voluntary disclosure to the IRS including a noisy disclosure and a silent disclosure. These disclosures are also sometimes termed a quiet disclosure and a loud or formal disclosure, but regardless of the name that is used, they represent the same types of disclosures. A silent disclosure occurs when the taxpayer simply files the back taxes without notifying the IRS’ Criminal Investigation Division. The taxpayer then cuts a check to settle the tax collection issues. A noisy disclosure occurs when the taxpayer or the taxpayer’s attorney schedules a meeting with representatives from the IRS criminal investigation Division.

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Is one type of disclosure better than the other?

One type of disclosure is not necessarily better than the other. It simply comes down to which type of disclosure would be more appropriate for the specific facts and circumstances you face. Thus, a tax professional cannot make a recommendation regarding the method that is more likely to produce a favorable result without first engaging in a meticulous review of your situation. However we can discuss the general situations in which one form of disclosure may be more appropriate.

In situations where it appears that the chances of a criminal prosecution are slight, a quiet disclosure is typically more appropriate. The silent disclosure allows a taxpayer to resolve relatively straightforward matters where there are not questions of fraudulent intent efficiently. However, if you face a more complex tax problem where large sums of money are involved, where there are questions regarding your intent to conceal income or to otherwise mislead the IRS, or where there is a real question regarding your motivations and goals a noisy disclosure is probably more appropriate.  The noisy disclosure can provide more favorable terms when criminal prosecution is a possibility. Furthermore, IRS agents are known to take an unfavorable view of quiet disclosures and may act more aggressively if more serious or additional tax problems are detected.

Correcting your tax problems brought about due to unfiled taxes will require some form of disclosure and for you to pay some amount of penalty. However paying a relatively small penalty is a more favorable outcome than facing a criminal tax prosecution or significant civil penalties.

Work with our firm to correct your back tax problems

Problems with back taxes can feel overwhelming and insurmountable, but they can be successfully addressed. An experienced tax attorney can develop a strategy to help you come back into compliance. To schedule a tax consultation, call the Law Offices of Robert Hoffman at (800) 897-3915 or contact us online.

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