An Arizona man has been indicted for allegedly stealing more than $700,000 in federal employment taxes from a business in the Phoenix area over two years. According to an Associated Press news report, officials with the Internal Revenue Service say the man is facing tax evasion charges. Officials say the man owned and operated entities that acted as outsourced human resources departments for his small- and medium-sized business clients who did not want to handle payroll or other functions internally.
IRS investigators said he failed to pay the agency nearly $711,000 in employment taxes from his clients’ businesses in tax years 2010 and 2011. They also allege that the man spent a large portion of the money on trips to Hawaii and Las Vegas, gambling online and at casinos, jewelry and tickets to sporting events.
What to Do If You Owe Taxes
Finding out that you owe more than expected to the IRS can leave you feeling panicked or depressed. However, there are steps you can take to make sure that you are following the law and don’t land yourself in a sticky situation. Paying taxes to the IRS is not an option. It is the law and not following the law can get you in serious trouble.
First, make sure you really owe the money. If you are shocked that you owe money to the IRS, find out why and how you got there. Read your tax return carefully and look for any mistakes. Make sure you have taken all the deductions for which you qualify. One missed question of checkbox may cause you to miss out on tax benefits to which you may be entitled. If you get a letter from the IRS saying you owe them back taxes, do not automatically assume that they are right. The IRS makes mistakes too. Call or write to them seeking a clarification.
See how you can minimize interest and penalties. Large tax bills are far worse if you have to pay penalties and interest on top of the original amount. You could also try asking for an abatement of penalties. The IRS often reduces or removes penalties and interest if the taxpayer writes a letter explaining the situation. For example, if you had a family crisis such as serious illness or if you made an honest mistake, the IRS may waive your penalties.
Pay what you owe as quickly as possible. If you owe tax that may be subject to penalties and interest, do not wait until the last minute to file your return. If you are unable to pay your tax bill by the time it is due, don’t avoid or ignore the bill. File an Installment Agreement Request (Form 9465) to set up installment payments with the IRS. This could be allowed if you owe $25,000 or less and if you can show evidence that you cannot pay the amount you owe right now.
You could also negotiate back taxes with the IRS through what is known as an Offer in Compromise, a program which allows qualified individuals with an unpaid tax debt to negotiate a settled amount that is less than the total owed to clear the debt.
What You Should Not Do
The decisions you take at this time could be critical to your financial future. Don’t put your tax bill on a high-interest credit card. Remember, the IRS charges far lower interest than credit card companies. Do not take money out of your retirement accounts to pay a tax bill because you may end up owing a penalty in addition to back taxes.
The best way for you to learn about your rights and protect yourself and your assets is by contacting an experienced Arizona tax attorney who can help you understand these complex issues and help you develop a concrete plan to get you out of this situation – be it filing for bankruptcy or devising a settlement plan. Taking this critical step will help you reduce or eliminate your tax debt before things get out of control.