Solving Tax Issues

Your tax liability is any amount you owe a taxing authority, such as the IRS. Having liability means you’re responsible for something. There can be several components to your total tax liability with an agency, including unpaid taxes from prior years. You can find your tax liability for the year on lines 37 and 38 of Form 1040 for 2021.

Back taxes are taxes that weren’t paid at the time they were due, typically from a prior year. You can owe back taxes at the federal, state, or local level, and you can owe them for a number of reasons. Many people owe back taxes because they didn’t have enough money withheld for taxes from their paychecks throughout the year. Some people may also owe because they were unaware that unemployment benefits are taxable most years, and didn’t have money automatically withheld. 

Form 1040-X is an amended tax return for individuals. It corrects, deletes, or adds information to a Form 1040 return that's already been filed with the IRS. You might find it necessary to file Form 1040-X if a W-2 or 1099 arrives for income that you'd forgotten about, or, for example, if your ex tells you that they also claimed your child as a dependent.

A notice of deficiency is a legal notice the IRS sends to taxpayers informing them that the IRS has determined the taxpayers owe additional income tax. If they choose to do so, the taxpayers have 90 days from the date of the notice to petition the United States Tax Court and challenge the determination from the IRS.

An offer in compromise is a proposal to the IRS to pay less than the full amount of your tax debt because you simply don't have the available funds or because paying the full amount would present a financial hardship. The IRS will assess your application and approve or deny your offer, or it might send your offer application back to you because you left out some important documentation or information. 

The issue of tax information privacy is covered by Internal Revenue Code Section 6103. The code, 26 U.S. Code § 6103, prohibits the IRS and your tax professional from disclosing your tax information to anyone without your explicit consent. Your tax professional can't even release your information to the IRS unless you give your permission, and the IRS and its employees can't release any information to your tax professional unless you give the IRS permission.

If the IRS determines that you can't afford to make tax payments, it may decide that your account is currently not collectible (CNC). That means it won't garnish your wages or levy your bank accounts, and it won't require that you set up an installment agreement. You must have little or no money left over after paying essential living expenses each month, such as rent, utilities, and groceries, to qualify for this relief.

A tax shield refers to a legal and allowable method a business or individual might employ to minimize their tax liability to the U.S. government. Properly employed, tax shields are used as part of an overall strategy to minimize taxable income.

IRS Form 8606 is a tax form you're required to file if you've made nondeductible contributions to an individual retirement account (IRA) during the tax year. It is also required if you have taken Roth IRA distributions or certain other IRA distributions, or if you have converted certain accounts to a Roth IRA during the year.

A taxable event is an event or transaction that triggers a tax consequence. A taxable event often results in taxes owed, but some taxable events can also reduce your tax bill. Payment of wages, dividends, or interest, and the creation of capital gains are all common examples of taxable events. Some changes in tax filing status—such as single to married filing jointly—are also considered taxable events.