IRS Holds Taxpayers Responsible – No Matter What

Many Americans like preparing their taxes every year; it helps them feel in control of their finances and they don’t want to pay someone else to do it. With a tough economy still lurking and the availability of low-cost often free tax preparation software, many are inclined to cut their basic costs, and doing their own taxes is one place they believe they can save. If a taxpayer has a simple tax return with deductions that don’t change year after year, they should be alright doing their own. However, tax laws are complicated and change frequently; tax law has seen major changes in 45 of the past 48 years. So as a result, those with the do-it-yourself spirit might find themselves missing important deductions or worse, inadvertently owing IRS penalties and fines for errors they didn’t know they made.

An article from MSN Money highlighted some statistics taxpayers may want to consider:

In 2011, the Internal Revenue Service estimated that the average taxpayer needed 23 hours to do his or her 2010 tax return — 32 hours if a Schedule C for business or a Schedule E for rental properties was filed.
Taxpayers spend more than 7.6 billion hours and more than $193 billion each year complying with the Tax Code – and that’s just to figure out what we owe.
Because the tax code is so complicated, more than 60% of Americans have professionals do their tax returns. Last April, IRS Commissioner Douglas Shulman reported that there had been about 3,500 tax law changes since 2000.

Understanding IRS Protocols to Avoid Tax Problems

Keep in mind that if you decide to do your own tax return or to have it prepared by a tax professional, the IRS holds you personally responsible for all the information you provide them. A News Max article titled, “Don’t count on IRS instructions for your tax return” mentions a case (Rodriguez v. Commissioner) that involved the court interpreting sections of the tax code that regarded extremely complicated foreign tax issues. In spite of the incorrect and often vague IRS instructions, that both self-preparers and professionals rely on to file complicated returns, the Tax Court ruled that taxpayers cannot rely on the IRS instructions when filing a tax return and paying tax. In other words, you may be on your own in a potential mine field. It’s best to get sound help from a tax professional.

Complex IRS Tax Issues Equal Larger Penalties

In general, the more complicated the tax problem, the larger the fines and penalties associated with errors and delinquencies. In cases involving complexities such as foreign taxes and off-shore bank accounts, you need to know what you are doing if attempting to adhere to the strict guidelines for affairs such as Foreign Bank Account Reporting (FBAR). The penalties for not filing and meeting the amnesty guidelines are severe and can include the following:

FBAR penalties can exceed 100% of the value of the asset, plus tax penalties and interest.
Some cases can be turned over to the U.S. Department of Justice for felony indictment, and criminal sanctions can be as much as up to 5 years in prison.

Offshore account holders are obliged to follow rigid procedures to ensure they get favorable treatment from the IRS. But coming forward before the IRS, (at this stage) is not something you should do by yourself; you need help from experts with years of experience (only hire a certified tax resolution specialist) who have a history of successfully representing clients before the IRS.

Get Tax Help Now – Hire a Professional

Because of stepped up IRS collection activities, you will want to prevent potential tax problems in the first place. If you have no issues and insist on filing your own taxes, you are wise to consult a tax professional every few years to ensure you are taking full advantage of the tax benefits available to you now and in the future.

If you currently owe back taxes on undeclared funds in off-shore bank accounts and need tax relief, it is in your best interests to seek the help of effective representation such as a tax attorney or Certified Tax Resolution Specialist who will handle your case and communicate with the IRS on your behalf. In the case of FBAR issues, these experts will make the required disclosures, filing FBAR reports and amending tax returns typically for 2003 through 2008 to get you back in compliance with the IRS once again.

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