Get Help Before It’s Too Late! The Real-Life Effects of Failing to Obtain Professional Tax Debt Help in Orlando

Ignoring the need for professional tax assistance can lead to several serious IRS challenges. Each of these situations can be avoided altogether with the right guidance from an experienced tax attorney. 

In this section, we’ll outline the frequent complications that arise when individuals and businesses in Orlando decide to do it alone or ignore their tax obligations.

Unfiled Tax Returns

One of the most surprisingly common issues we encounter at J. David Tax Law is individuals and businesses failing to file their tax returns. 

There are numerous reasons why someone might fail to file their tax returns. Regardless of the reason, the decision not to file can lead to serious complications.

The failure-to-file penalty for unfiled tax returns is typically 5% of the unpaid taxes per month, up to a maximum of 25%. If taxes remain unfiled for more than five months, the minimum penalty becomes $435 or 100% of the unpaid tax, whichever is less, for returns required after 2019. 

Furthermore, unpaid taxes accrue interest from their due date at the federal short-term rate plus 3%, compounding daily. If unresolved, these issues may escalate to severe IRS actions such as wage garnishments, bank levies, and even criminal charges for tax evasion. It is considered a felony punishable by up to five years in prison and fines of up to $250,000 for individuals or $500,000 for corporations.

Tax Liens

One of the most formidable tools at the IRS’s disposal is the tax lien. A tax lien is the government’s legal claim against your assets when you fail to pay your tax debt. This measure is a public declaration that the IRS has a right to your real estate and personal property, and financial assets.

A tax lien can be particularly damaging in several ways such as:

• Credit Score Impact: A tax lien is a matter of public record and can significantly harm your credit score. This damage can prevent you from obtaining new lines of credit, refinancing existing loans, or securing favorable interest rates. 

• Restrictions on Property Transactions: If you have a tax lien on your property, it complicates selling or mortgaging the property. Any buyers or financial institutions will see that the IRS has a claim on the proceeds. Thus, making it difficult to complete any transactions without clearing the outstanding tax debt.

• Asset Attachment: A tax lien attaches to all your owned assets. This includes securities, vehicles, and in some cases, valuable personal belongings. It also attaches to business assets which can complicate business operations or the ability to sell the business.

• Future Assets: One of the most daunting aspects of a tax lien is that it can attach to assets acquired during the duration of the lien. This means that if you acquire new property or assets after the lien is issued, those too are subject to the lien.

Wage Garnishment

Wage garnishment is a legal procedure through which a portion of an employee’s earnings is withheld by their employer for the payment of a debt. In the context of IRS debt, this is one of the agency’s most aggressive collection methods. It continues until the entire debt is paid off, or until some other arrangement is made to settle the outstanding balance. 

The reduction in take-home pay might mean that individuals struggle to cover essential living expenses like rent, utilities, and food. This can lead to further financial difficulties such as accruing debt in other areas, damage to credit scores due to missed payments and increased stress and mental health challenges.

IRS Audits

One of the critical consequences of avoiding professional tax help is the increased risk of errors on your tax returns. This is a common and known way to trigger an IRS audit.

Audits are rigorous reviews of your tax filings and financial records. It intends to verify the accuracy of your returns and ensure proper tax compliance. The IRS can initiate this due to various reasons such as discrepancies, excessive deductions, or in some cases randomly.

The audit process demands documentation and detailed explanations of every item of income and deduction claimed on your returns. This includes providing receipts, invoices, bank statements, and other paperwork that substantiate your tax claims. Failing to defend your filings can result in adjustments, where additional taxes, penalties, and interest may be assessed.

Back Taxes Owed

Owing back taxes is perhaps one of the most daunting financial challenges one can face. This situation often begins mildly—a missed deadline or an underestimated tax payment—but can quickly escalate into a significant problem. Each year, as back taxes remain unpaid, penalties and interest accumulate. Thus, inflating the original amount owed to the IRS.

The consequences of letting back taxes accumulate are severe. The IRS may implement aggressive collection measures, which could include:

• Tax Liens

• Levies

• Seizure of Property

Without intervention, these actions can impact your financial stability and personal life. The cycle of tax debt continues to grow, becoming more unmanageable over time. The stress and financial burden can affect not just your economic situation but also your family life and mental health.