Frequently Asked Questions About Taxes
Q. Can my back taxes be taken care of in a bankruptcy?
A. There are circumstances in which taxes can be eliminated in bankruptcy. When that is not an option, you can sometimes pay back less than the total amount owed in a bankruptcy or pay your back taxes with no penalties or interest, which can really prove costly. We will need to evaluate your situation in order to tell you what benefits a bankruptcy could provide to you in dealing with your delinquent taxes. Give us a call at Steidl and Steinberg Tax Services for a free, in-person consultation.
Q. What can happen to me if I owe taxes?
A. If you ignore communications from the IRS or the PA Department of Revenue regarding your tax debt, you could be facing some pretty serious consequences. Both can file a lien against you, which entitles them to an interest in everything that you own. If you continue to ignore the debt, your assets could even be sold. Both can also levy against your wages or bank account and take enough money from you that you are unable to pay your bills.
Q. I’ve heard that the Internal Revenue Code is unconstitutional. Do I really have to file my taxes?
A. YES, YES, YES and YES. While there are some people who believe that the Internal Revenue Code is unconstitutional, the Supreme Court of the United States disagrees. Willful failure to file your tax returns is a crime and could result in you going to jail.
Q. Is there a legitimate way for me to pay less on my tax debt than what I owe?
A. Yes, some people qualify for an offer-in-compromise, which allows you to pay less than the total amount owed and stop interest and penalties from accruing. Contact an attorney at Steidl and Steinberg Tax Services to see if you qualify.
Q. Can I make a payment plan to pay my back taxes?
A. Yes, you can make arrangements to pay your taxes over time. The specifics depend on who you owe the taxes to and how much you owe. The attorneys at Steidl and Steinberg can explain your options and help you get on a payment plan.
Q. If I can’t pay my tax debt, should I not file my tax return?
A. You should file your tax return whether you can pay your tax debt or not. You receive no benefit from not filing your returns. In fact, most times, not filing your return on time will limit your options for resolving your tax debt.
Q. I’ve heard that if I ignore the IRS, they eventually won’t be able to come after me for my back taxes anymore. Is this true?
A. The IRS is only allowed to collect taxes from you for a certain period of time after they determine what you owe. With some exceptions, that time period is 10 years. However, very few people can just wait for the statute of limitations to expire. For most, the IRS will take action against their property or money first. It is not a good idea to count on the IRS not pursuing you.
Q. A person at the IRS said that if I didn’t pay my taxes they would sell my home and my personal property. Can they really do this?
A. Yes, they can. The good news is that this does not happen very often. If you are cooperating with the IRS, they will not try to sell your property. However, if you owe a lot of money to the IRS and do not cooperate, the IRS may flex their muscles and try to sell your property.
Q. Is it really necessary to have help preparing my tax return?
A. For individuals that have fairly simple finances, for instance, if you rent, have a car that’s paid off and have worked the same job for 5 years, you may not need assistance preparing your tax return. For those who own a small business, have lots of investments or have any other complicated financial situation, it is well worth having a tax professional help prepare your returns.
Q. I want to get money out of my retirement account. Do I have to pay taxes on the money I withdraw?
A. You could find yourself not only owing taxes, but also an early withdrawal penalty. Retirement account withdrawals are one of the most common reasons our clients owe taxes. Be sure to consult with a tax professional before taking money from your retirement account.
Q. I’m self-employed and seem to owe taxes every year. What can I do to get on track?
A. There are steps that you can take to help manage paying taxes as a self-employed person. By making quarterly estimated tax payments, keeping good records and keeping your business and personal income separate, you can make tax time much less painful. Contact the attorneys at Steidl and Steinberg to see how to manage taxes while running your own business.
Q. I got this form in the mail called a 1099-C saying that a creditor canceled some of my debt. What is this and how could it affect my taxes?
A. Whenever a creditor forgives debt, the general rule of the IRS is that you have to pay taxes on the amount of debt that was forgiven. Let’s say you have a $10,000.00 credit card that you settled for $4,000.00. The credit card company will file a 1099-C cancelation of debt income form to the IRS. The IRS treats the $6,000.00 that you don’t have to repay to the credit card company as income, just like you earned $6,000.00 more at work that year. There are some situations where you don’t have to pay those extra income taxes. Call us and we can help you deal with the 1099-C and see if you qualify to not pay those extra taxes.
Q. My boss says that he pays me “under-the-table”, but I worry that I could get in trouble. Should I be listing the money I receive on my tax return?
A. Yes, we have seen situations where a boss tells their worker that they will be paid under-the-table, but then report the money they made to the IRS. The worker is then left scrambling to deal with the surprise. The law says that you must disclose any income from any source on your tax return and there are very few exceptions to this. Even if your boss isn’t operating on the up and up, you should.
Q. Can you help me if I haven’t paid my employee withholding taxes?
A. Yes, the attorneys at Steidl and Steinberg Tax Services can help you get caught up on all taxes related to your business including employee withholding taxes. Give us a call to see what your options are.
Q. I owe back real estate taxes and the County is threatening to sell my house. Is there anything I can do?
A. Yes, we can help you get on payment plan with your county and if that doesn’t work, we can look at the option of you filing a Chapter 13 bankruptcy, which will give you up to 5 years to get caught up on your delinquent real estate taxes.