If you are worried about owing the IRS money in the future, always be sure you do your research whenever you receive a significant sum of money. Regardless of the reason you receive money – whether it’s from a job, business, lottery, or inheritance, be sure to be aware of any tax consequences surrounding the issue.
Otherwise, you may find yourself faced with an IRS tax debt you are unable to pay. Here are some of the most common reasons people find themselves owing a large IRS tax debt:
• Failing to file a return. Some people are afraid to face the truth a certain year, or are afraid they can’t pay their tax liability, so they simply don’t file the return at all. Each year after, they are keenly aware they owe taxes, but remain afraid because of fear of what the IRS will do to them once it finds them.
• Incorrect wage withholdings. Sometimes, you or your employer makes a mistake when deciding how much in taxes you should have withheld from your paycheck. The net result is a larger tax burden at the end of the year, or several years’ worth of additional IRS tax debt if you fail to file your taxes properly for several years.
• Gambling winnings. Any money over $600 you win in a contest or as a result of gambling, whether at the casino or lottery, is subject to taxation. Casinos and contest sponsors send their data to the IRS, so it has record of how much you won and how much tax you owe. If you do have substantial winnings, be sure to either figure out how much you owe in taxes right away and set it aside, or consult a professional tax attorney.
• Excessive tax credits and deductions. Some people choose to cheat on their taxes and take more credits and deductions than what they are legally entitled to. Others simply may not understand tax law and take excessive deductions based on a commonsense, not legal, understanding. Taking too many deductions, or certain deductions the Internal Revenue Service closely monitors, may result in an audit. No one knows the precise formula used to audit tax records, but if you are audited, you could end up owing much more in taxes.
If Any of These Situations Apply to You, Seek an IRS Tax Resolution!
Owing IRS tax debt is a situation no one wants to be in. But, the Internal Revenue Service is usually very willing to work out a fair solution, if you approach them first. Be sure to seek out an IRS tax resolution, but be sure also to have the assistance of a skilled tax attorney – this situation is probably more than you can handle!