According to IRS statistics, about one in every 15 taxpayers has some IRS problem. The "good" news is many of these problems are small and can be easily handled by the taxpayer contacting the IRS. Assuming that only 25 percent of the troubled taxpayers owe a large (over $20,000) tax balance, that means 3.6 million U.S. taxpayers have a formidable challenge facing them.

Two groups of taxpayers experience issues with their tax filing obligations: individuals and businesses. Either group may have income tax problems, and any business with employees may have employment tax problems. On occasion, nonprofits and even governmental entities may run into tax problems, but most of their problems are like those of a business.

The most common problems fall into two areas: failure to file and/or failure to pay. Each penalty may accumulate up to a total of 25 percent of the original tax that was not remitted in a timely fashion. The IRS also charges interest on the unpaid balance. As you might expect, there is another common penalty related to audits: the 20 percent accuracy-related penalty. While these are the most common penalties, there are hundreds of others.

While the thought of being audited may seem like a taxpayer's worst nightmare, once you've surived the emotional impact of having to go through an audit, the real issue you're facing is failure to pay.

Seldom does a tax issue start with a taxpayer setting out with the intention of not paying the IRS. Most tax problem resolution cases begin with some serious life event that presents a problem for the tax payer.

However, all is not lost. I believe every tax problem has a solution. So does the American Society of Tax Problem Solvers (ASTPS) -- a nonprofit professional association with members who specialize in returning troubled taxpayers to the government's good graces. To find an ASTPS member in your area, email referral@astps.org with a short description of the tax problem, and they will attempt to match you up with a practitioner who can help.

The next article in this series on IRS distress will discuss how small business taxpayers encounter surprise tax problems from some common events.

Tags: Laws and Regulations Fraud Accounting Taxes

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