The average American tax payer goes to their job and then goes home. When they get their check they lament about the government taking most of their paycheck, and then they cash their check and spend their money. Every January or February comes about, they get their W2’s, fill in the right boxes with the right information and hope for the largest amount of money they can get. In fact most people have already spent their refund check before it is even there. when they don’t get the amount of money they want or feel is acceptable, they complain about not getting enough money and then they go out an spend their money as usual. This is the extent that most people deal with the tax department. Most people go through all of this with out complaining or trying to buck the system, because they want to avoid real IRS trouble. This where the IRS has decided that you are not paying or doing something right, and they are now going to step in and tell you how much money they want. Most people have no idea what to do so they just watch as the IRS takes more and more money from them. They were not expecting tax troubles and have neither the knowledge or experience to deal with them properly.
IRS trouble usually happens to people who actually have the money to buy things above and beyond the normal necessities of life. The people that the fear and are hurt by the IRS the most, are the people who are just feeling a little bit of the wealth that is available. These are the people that have got enough raises, saved enough money, or became a small business owner and now are feeling the benefits of their sacrifices. These are the people that are saving money, buying houses, and opening up mutual fund accounts. All of these have to be claimed and taxed in some way, but who knows the way. Most people are so scared of owing money, they don’t want to have some one do their taxes for them for some astronomical fee and then find out that they have to owe money. That means that they have to pay the tax preparer fee and the tax fee. It is this where IRS tax trouble can start. When these people start to fill out their taxes, they listen to the tax form booklets. Every tax person will tell you that these booklets only tell you half the story, but the small middle class worker feels he has no other option. He fills it out, find he gets a refund, and is pleasantly surprised he has not ended up encountering IRS troubles.
But tax problems can be long in the making. Unbeknownst to him, the IRS is 7-10 year behind. That means that only the extremely sever embezzling cases will get immediate top priority. Therefore while they are out spending their refund money, they have no idea that there was a mistake in their figuring. A mistake that wasn’t told to them, but that was in a footnote or a tax law that they were told at one time, and now is going to rule their life. The IRS reads the bottom line, does what needs to be done, and then files it for research. When the researcher gets this and goes over the figures, they will then realize that this tax payer owes money. In fact he owes the refund, plus whatever he originally owed. Therefore if the refund was for $600, and he actually owed $500, then the total now due is $1100. The small tax payer will receive a letter that says he’s being audited. This is the largest IRS trouble that most people will and can stand.
The key to dealing with IRS trouble is to ensure that when you do find yourself on the wrong end of IRS scrutiny you quickly seek professional tax attorney help. Without an experienced IRS advocate acting on your behalf you may well suffer far greater than you otherwise should or would.