In 1913, Congress passed the 16th Amendment to the U.S. Constitution. One of its main purposes is to give Congress the power to create and collect income tax. Eventually, the 16th Amendment led to the passing of the Internal Revenue Code (“IRC”). The IRC is enforced by the Internal Revenue Service (“IRS”), which is the federal government agency responsible for collecting taxes.

The IRC sets the main standards for all tax laws, including federal, state, and local tax regulations. According to the IRC, income tax is a type of tax that the government imposes on personal income. For instance, when you receive a paycheck, you may notice that a certain percentage is deducted from the total amount. This deduction usually accounts for different levels of income taxes and state or federal programs (e.g., Social Security benefits).

If your employer deducts income taxes from your paycheck, then this will be reflected when you file your state and federal taxes for the year. Hence, why you sometimes receive a tax refund or excess payment after you file your taxes. It means that you paid more income tax than was necessary for the year.

However, not everyone will be subject to income tax laws. For instance, the federal government does not collect income tax from persons who are unemployed. Certain states also might not subject their residents to state income taxes.

Therefore, to learn more about federal income tax laws and the rules for paying income taxes in your state, you should contact a local tax law attorney for further advice. A tax law attorney will also be able to discuss your individual rights and protections under federal and state income tax laws.

What Happens If I Don’t Pay All of My Taxes?

An individual who does not pay all of their taxes may be subject to fees. If there is a legitimate reason as to why a taxpayer did not pay their taxes, then they may be able to negotiate for an extension or to set-up a payment plan to pay taxes still owed in monthly installments.

On the other hand, if a taxpayer does not have a valid reason as to why they did not pay all of their taxes or is deliberately avoiding paying off their taxes, then they could be charged with a felony.

In general, it is illegal to refuse to pay taxes. A person who engages in an intentional scheme to avoid paying taxes to the IRS is committing tax evasion. Tax evasion is a felony offense that can lead to serious fines and a prison sentence for up to five years or longer.

Additionally, a taxpayer who only pays a portion of the taxes they owe, may be subject to an audit by the IRS. Briefly, an audit is basically a review of a person’s financial information and various monetary accounts. The IRS uses audits to confirm that a taxpayer is accurately reporting their taxes and complying with federal tax laws. The results of an audit could lead to criminal consequences, amended tax returns, or no changes at all.

What Is an Income Tax Audit?

As previously discussed, a taxpayer may be subject to a tax audit if the IRS does not believe that they have paid their fair share of taxes or that they deducted items that should not have been deducted.

During an income tax audit, the taxpayer will meet with an IRS representative who may ask specific questions about their tax returns. This meeting is to ensure that the taxpayer did in fact provide a full report of their income and that any deductions declared were lawful and appropriate. If the IRS representative determines the taxpayer was honest, then the case will be closed.

However, if the IRS discovers the taxpayer was lying or did not report certain forms of income that should have been reported, then they will likely be subject to supplemental taxes and monetary penalties. Thus, it is very important that taxpayers keep records of their past tax returns as well as expense records to support their deduction claims.

In addition, if the IRS demands a payment of less than $50,000 in taxes within a single year, then the taxpayer may petition the U.S. Tax Court to review the matter. The taxpayer may dispute the amount of income taxes that they owe before this court and then must await to receive a decision from the U.S. Tax Court. It should be noted that the judgment that the U.S. Tax Court issues will be considered as final.

What Is an Offer in Compromise?

An offer in compromise refers to an agreement that is made between an income taxpayer and the IRS. If accepted, an offer in compromise will permit a taxpayer to pay less than the full amount of back taxes that they owe.

However, an offer in compromise is not available for all taxpayers or in all income tax situations. Thus, it may be in a taxpayer’s best interests to consult a tax law attorney about whether an offer in compromise is the right arrangement for their situation.

What Is an Installment Payment Agreement?

The amount of fees and interest that might accrue when an individual has failed to pay their income taxes can be as high as several thousands of dollars, if not more. Accordingly, many income taxpayers may find that they are unable to pay the full amount of income taxes that they owe to the IRS. Thus, in some cases, the IRS may agree to enter into an installment payment arrangement to make it easier for the taxpayer to pay them back.

In other words, an installment payment agreement is basically a contract that provides the terms and conditions of how a taxpayer can fairly pay back the taxes they owe to the IRS. They generally follow a monthly payment plan that is based on a certain percentage of the total amount of taxes that the taxpayer still owes.

For individuals who need help with the process or do not understand their installment payment agreement, they may contact a tax law attorney for further assistance. A tax law attorney can initiate contact with the IRS on a taxpayer’s behalf and negotiate a reasonable installment payment agreement.

Alternatively, if an installment payment agreement already exists, then an attorney can review the terms of the agreement and communicate with the IRS to reduce the amount that a taxpayer needs to pay in monthly installments.

Do I Need an Income Tax Law Attorney?

In general, both federal and state tax laws are notoriously difficult to understand. To make tax matters even more complicated, the IRC is amended every single year. This means that all federal, state, and local tax laws are subject to change as well. So, you can only imagine how complex a situation might become when a person is faced with a narrower tax issue like paying their state income taxes.

Thus, you may want to consider hiring a local tax law attorney if you are experiencing issues with paying your income taxes. This is especially true if you have neglected to pay your income taxes for a number of consecutive years. An experienced tax law attorney can communicate with the IRS on your behalf and can negotiate for an offer to compromise.

Your attorney can also ask the IRS if it would be willing to extend your payment deadline, or alternatively, if it would sign an installment plan agreement. Additionally, your attorney could petition the U.S. Tax Court if you believe there is an error with your tax return and can provide representation in court.

Lastly, if you are being audited by the IRS, your attorney can ensure that the audit is properly conducted and that your rights as a taxpayer are rigorously protected.