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Are You Facing an IRS Tax Penalty? Here's What You Need to Know

June 26, 2012 | Comments: 0 | Views: 147

Let's face it--filing taxes is no easy task. Add to that the possibility of missing paperwork, clerical errors, tardiness, and other risk factors, and taxes can quickly become a veritable nightmare. When taxes are filed incorrectly, late, or not at all, you will end up owing back taxes to the state or federal tax authority. While it might seem like you could quickly repay your tax debts to the IRS, it's unfortunately not that simple. From property liens to wage garnishments to inflated fines, IRS back taxes are often complicated by tax penalties, which makes them more difficult to pay off over time. If you've been saddled with a specific tax penalty, then you need to educate yourself about the consequences and how you can get it reduced or removed as soon as possible. After all, when it comes to state and federal tax penalties, time is of the essence.

First things first: Before you can attempt to counteract a specific tax penalty, you need to understand exactly what it is. Below, the most common types of IRS tax penalties are listed, along with a brief description of each, so you can better comprehend what you're facing.

IRS Wage Garnishment: The federal tax authority is legally empowered to institute a wage garnishment when you owe back taxes. During a wage garnishment, the IRS may deduct the appropriate amount of money from your incoming wages in order to satisfy the debt owed.

Property Lien: If you're unable to repay the large sum of back taxes that you owe, the IRS may elect to seize some of your assets, including your home, business, and vehicle, in order to collect their debt.

Bank Levy: Another way for the state or federal tax authority to ensure that you repay your back taxes is to place a levy on your bank account. When this happens, your account will be frozen, and then the authorities will deduct the necessary amount from your bank account in order to fulfill your debt.

An IRS tax penalty for underpayment or nonpayment may feel overwhelming, especially considering the fact that interest rates and additional fees could leave you paying more than you initially owed. However, it's important not to get swallowed up in panic. There are skilled tax attorneys and accountants located in every county in the country, and they're available to consult with taxpayers who, like you, are in the midst of severely trying financial times. Income tax penaltieslike wage garnishments and property seizures are never easy to overcome, but a licensed professional will be able to help you compile paperwork and other documentation that you'll need to argue your case and negotiate with the tax authorities.

Don't risk deducting your hard-earned wages, permanently damaging your credit score, or losing the ability to receive a loan--instead, educate yourself about the specific tax penalty that you've been slapped with and consult with a certified professional for guidance. All cases vary depending on the mitigating circumstances or presence of reasonable cause, but there's usually a way to resolve your back tax issues without having to sacrifice your livelihood.

Kelly Robertson is a taxpayer and Internet marketer for Prospect Genius, a leader in affordable online advertising for local service providers.

Source: EzineArticles
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