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Tax agencies tackling backlogs and stepping up enforcement

On Behalf of | Jan 19, 2023 | Tax Audits

Complying with tax laws is a complicated task, and errors can be made. Due to slowdowns and disruptions in processing tax returns in recent years, both the IRS and the California Franchise Tax Board have increased collection and enforcement actions to catch up with their backlogs. People or businesses receiving notices about unpaid taxes or failure to file returns need to explore all of their options for correcting errors or paying their taxes. Otherwise, they can lose their chance to avoid property seizures or wage garnishments.

Timely response to all notices

Taxation authorities send out a variety of notices regarding compliance failures. They may or may not be accurate, but taxpayers must respond within the timeline stated in the letter, usually 30 to 60 days. Your first step will be to ask your tax accountant how to respond. Some situations benefit from obtaining advice about tax laws because a strategic response may help you take advantage of a statute of limitations or avoid an in-depth financial disclosure to the IRS.

Look into fresh start

If it turns out that you owe taxes, you have some payment plan options. You may be advised to start a short-term, 120-day payment plan to reduce your balance and demonstrate your willingness to comply. This might lead to a longer-term installment plan agreement. If your debt is less than $50,000, you may qualify for a simplified type of payment plan known as the Fresh Start program that lasts for seven years.

More attention on top earners

For years, IRS auditors have focused on returns from lower-income filers in an effort to uncover Earned Income Credit fraud. Now the agency has shifted gears and is building specialized teams to audit top earners and high-net-worth filers.