Most Common Reasons for Falling into Debt with the IRS

<h1>Most Common Reasons for Falling into Debt with the IRS</h1>Author: <a title="Chintamani" href="http://www.articlesbase.com/authors/chintamani/286774.htm">Chintamani</a> There is any variety of reasons taxpayers find themselves owing money to the IRS.  Some are very complex, but others are commonplace.  In order to avoid problems, it may be worth considering how the average person finds himself winding up in debt to the IRS. If you earned money in the calendar year, you have to file an income tax return.  If you had enough withholding, you may not need to pay the IRS anything.  However, if you owe, you need to pay as soon as you possibly can.  Stalling tactics and delay doesn’t work with the IRS.  The IRS is the most tireless collection agency in the world.  If you owe them money, they aren’t just going to go away. If you file an income tax return and you owe, but do not pay by April 15th, you are now in debt to the IRS.  Penalties, interest, and fines will begin to accrue on April 16th. Reporting the correct amount of your earnings is your responsibility.  If your W-2 form is incorrect and does not reflect the true total of your earnings for the year, you could be assessed additional tax liabilities, penalties, fines, and interest.  If this continues for a number of years before the IRS catches on, you could find yourself with an immense tax liability when they finally do learn of the mistake. Everything you win from a lottery, a contest, or gambling is taxed as earned income.  If you have winnings of $600 or more, you must report it on your income tax return.  Most contests, lotteries, and casinos report winners and their prizes won to the IRS.  If you don’t file such income and the IRS becomes aware of it, you can face increased tax liability, fines, penalties, and interest. Filing disproportionate deductions, exemptions, and tax credits will, eventually, get you tagged by the IRS.  You may get away with filing excessive deductions for a while, but eventually you will get caught.  No one is certain exactly how the IRS decides who to audit, but filing big deductions, tax credits, and exemptions seems to always send up a red flag on your income tax return. If you are an employer and you fail to pay your payroll taxes, you will be in trouble fast.  Over the years, the IRS has become very aggressive in seeking unpaid payroll taxes, especially if you are a small business.  Be careful to pay all of your payroll taxes on time.  Falling behind on withholding could land you in jail. If you own your own business or if you are self-employed, you must pay Estimated Taxes on a quarterly basis.  If you fail to do so, you will owe the taxes due plus penalties and interest for failing to make your quarterly payments.About the Author: Chintamani Abhyankar, is a well known expert in the field of finance and taxation for last 25 years. He has written many books explaining inside secrets of the magic world of personal finance. His famous eBook <a href="http://www.planningyourtax.com">Stop donating your money to IRS</a> which is now running in its second edition, provides intricate knowledge and valuable tips on personal finance and income tax.Article Source: <a href="http://www.articlesbase.com/">ArticlesBase.com</a> - <a href="http://www.articlesbase.com/taxes-articles/most-common-reasons-for-falling-into-debt-with-the-irs-1462811.html" title="Most Common Reasons for Falling into Debt with the IRS">Most Common Reasons for Falling into Debt with the IRS</a>

There is any variety of reasons taxpayers find themselves owing money to the IRS. Some are very complex, but others are commonplace. In order to avoid problems, it may be worth considering how the average person finds himself winding up in debt to the IRS.

If you earned money in the calendar year, you have to file an income tax return. If you had enough withholding, you may not need to pay the IRS anything. However, if you owe, you need to pay as soon as you possibly can. Stalling tactics and delay doesn’t work with the IRS. The IRS is the most tireless collection agency in the world. If you owe them money, they aren’t just going to go away.

If you file an income tax return and you owe, but do not pay by April 15th, you are now in debt to the IRS. Penalties, interest, and fines will begin to accrue on April 16th.

Reporting the correct amount of your earnings is your responsibility. If your W-2 form is incorrect and does not reflect the true total of your earnings for the year, you could be assessed additional tax liabilities, penalties, fines, and interest. If this continues for a number of years before the IRS catches on, you could find yourself with an immense tax liability when they finally do learn of the mistake.

Everything you win from a lottery, a contest, or gambling is taxed as earned income. If you have winnings of $600 or more, you must report it on your income tax return. Most contests, lotteries, and casinos report winners and their prizes won to the IRS. If you don’t file such income and the IRS becomes aware of it, you can face increased tax liability, fines, penalties, and interest.

Filing disproportionate deductions, exemptions, and tax credits will, eventually, get you tagged by the IRS. You may get away with filing excessive deductions for a while, but eventually you will get caught. No one is certain exactly how the IRS decides who to audit, but filing big deductions, tax credits, and exemptions seems to always send up a red flag on your income tax return.

If you are an employer and you fail to pay your payroll taxes, you will be in trouble fast. Over the years, the IRS has become very aggressive in seeking unpaid payroll taxes, especially if you are a small business. Be careful to pay all of your payroll taxes on time. Falling behind on withholding could land you in jail.

If you own your own business or if you are self-employed, you must pay Estimated Taxes on a quarterly basis. If you fail to do so, you will owe the taxes due plus penalties and interest for failing to make your quarterly payments.

Chintamani Abhyankar, is a well known expert in the field of finance and taxation for last 25 years. He has written many books explaining inside secrets of the magic world of personal finance. His famous eBook Stop donating your money to IRS which is now running in its second edition, provides intricate knowledge and valuable tips on personal finance and income tax.

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