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How long does the Internal Revenue Service have to collect unpaid taxes from you? The statute of limitations under the Internal Revenue Code is then years that begins running after the first notice you receive foran outstanding tax balance.

A taxpayer’s intent, or reasons, for underreporting income or otherwise having errors on a tax return matters. The IRS divides this into willful and non-willful conduct.

Arizona is a "community property" state, meaning the law supports that spouses share ownership of assets acquired during their marriage. This can include any debts that are owed by spouses to the Internal Revenue Service. The IRS uses a two-step process to determine what qualifies as community property regarding one spouse's debt. In determining the

Whether a taxpayer’s activity is a business or a hobby can potentially affect their taxes and tax liability. The IRS defines a hobby as an activity a person pursues for enjoyment and not for making a profit. Businesses, in comparison, are activities that are engaged in for the purpose of making a profit.

Taxpayers have the right to minimize their tax liability. The problem arises when they use illegal or prohibited practices to escape their liability. One of these banned methods is known as sham transactions.

Recognizing that even the best-run businesses often have gaps in their documentation, the Cohan Rule fills out a middle ground, allowing businesses to claim expenses even when they’re missing receipts or other needed documentation. The rule essentially recognizes that businesses incur expenses, and estimates of those expenses are reasonable.

Under the new rules, partners no longer have a role to play in any audit or examination. They aren’t even notified of the audit and won’t be part of any defense during the examination. While the partnership itself will be notified of the audit, individual partners won’t be informed.

Mistakes happen on tax returns. In some cases, the IRS will request a revision, and the taxpayer will correct the mistake. In other cases, the taxpayer may need to pay not only the unpaid taxes and interest but also a penalty.

When the IRS is investigating a taxpayer for mistakes on a tax return or a lack of a return, the agency has the power to gather evidence. This includes books, papers, records, and other documents that might be relevant for the investigation.

When employers fail to pay payroll taxes, the IRS may assess them under the Trust Fund Recovery Penalty (TFRP). The IRS may assess the TFRP against anyone who is responsible for collecting and paying these taxes and willfully fails to pay them.

One of the lesser-known branches of the IRS is the Office of Professional Responsibility (OPR), which oversees professionals who work with taxpayers. OPR’s responsibilities include ensuring tax advisors and other tax professionals follow Circular 230’s standards.

The IRS will send out Notice LT16 when the agency believes a taxpayer hasn’t filed their tax return or has unpaid taxes. Regardless of what they think they have or haven’t done, taxpayers should respond to the notice. Failure to communicate with the IRS could result in continuing action against the taxpayer and limit their options for resolving the issue.

When taxpayers underpay their taxes to the IRS, they have to pay interest on the underpaid amount. The same is true when a taxpayer overpays their taxes, and the IRS owes them money.

The majority of audits that the IRS conducts are resolved as civil matters. Some, however, may transform into criminal investigations that can potentially lead to criminal charges and prosecution. If a taxpayer is convicted, they can face significant federal penalties, up to and including jail time.

The Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) requires any sale or disposition of U.S. real property interests that involves a foreign seller to submit 10 or 15 percent of the sale price to the IRS for withholding. While the tax debt is the seller’s, it’s the buyer’s responsibility to send the withholding amount to the IRS.

One of the quirks of FIRPTA is that the buyer, even if a U.S. citizen or domiciled corporation, is responsible for withholding the required amount and sending that amount to the IRS. The buyer is also generally responsible for completing and submitting Form 8288 or Form 8288-A.

One of the commonly known rules about our criminal justice system is that spouses can’t be forced to testify against each other. What’s less known is how one spouse’s tax debt can affect the other spouse’s assets.

For some people, filing for bankruptcy is the best choice for getting a clean financial slate.  Before opting for that choice, however, individuals should be aware of all of the pros and cons of filing, including timing requirements related to discharging tax debts.

If a taxpayer has a debt forgiven, discharged, or cancelled for less than the amount owed, they generally have an obligation to report the taxable amount of debt as ordinary income on their tax return.

Like much of the tax code, FIRPTA sounds simple on the surface but has quirks and twists that can make navigating it challenging. These are some of the common questions that taxpayers ask about FIRPTA.

When the seller of a U.S. real property interest is a foreign national, the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) applies to the sale and determines applicable taxes. In general, any sale that falls under FIRPTA requires withholding of 10 or 15 percent of the gains from the sale. Even if a property sells at a loss, in general, the buyer must still withhold 10 or 15 percent of the sale price.

The Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) governs real property sales when a seller is a foreign national. In general, any sale that falls under FIRPTA requires withholding of 10 or 15 percent of the gains from the sale. The IRS defines real property as land or improvements to land. FIRPTA’s definition of real property includes that meaning but expands beyond traditional real estate sales.

The IRS considers money earned from renting property as a form of income. This means that it can be taxed similarly to other types of income.

The IRS Automated Underreporter Program (AUR) is the name for the computer program that reviews and compares tax returns against information supplied by third parties to the IRS about that taxpayer. The AUR includes all types of reportable income, ranging from wages to dividends.

To file taxes, all taxpayers should have a Taxpayer Identification Number. For U.S. citizens, their Social Security number is their taxpayer identification number. Foreign nationals still have to pay taxes, but they don’t have a Social Security number. Individual Taxpayer Identification Numbers (ITINs) fill in the gap. Individuals who don’t qualify for a Social Security number can apply for an ITIN.