12 Myths About the IRS That Taxpayers Need To Know

I was recently contacted by an organization that offers Continuing Legal Education credits to attorney. They want me to teach a two hour course to attorneys on IRS Problem Resolution. Now I often do this for attorneys, CPAs, and enrolled agents in Florida and around the country but those classes always consist of individuals with at least some tax knowledge or background. They have an interest in this area of the law.

The attorneys for this new course may not even have an interest in solving IRS problems. Many will only be there to get two hours of CLE credit.

The challenge is to make this interesting enough that the attendees learn something and not fall asleep. I decided that to keep it interesting I would present “The 10 Myths About The IRS.” However, when I prepared the list, I came up with 11 myths. There is never a seminar with 11 items. It is either 10 or 12, so I had to come up with one more to make it an even dozen. Below are the 12 myths that I am planning on teaching. As I write the content, I will post each one in upcoming newsletters.

12 Myths About the IRS That Taxpayers Need To Know

1.     People who do not pay their taxes are bad people.

Not paying your taxes doesn’t make you a bad person; often, financial hardships or other circumstances lead to this situation. Many taxpayers get overwhelmed, but the key is to stay proactive and seek help before the IRS comes knocking.

2.     The IRS is impossible to deal with.

While the IRS can be challenging, they must follow strict rules and guidelines. Knowing how to navigate the system and finding the right person to speak with can lead to reasonable solutions.

3.     Taxpayers have no rights to question IRS decisions.

Taxpayers have a robust set of rights, including the ability to challenge and appeal IRS decisions. Knowing and exercising these rights can lead to fairer outcomes, especially when dealing with IRS actions.

4.     This is America. You are innocent until proven guilty.

With the IRS, the burden of proof often falls on the taxpayer to justify their reported income and expenses. Success in an audit requires presenting solid evidence, even when full records aren’t available.

5.     The IRS never forgives penalties.

Contrary to popular belief, the IRS often forgives penalties if the taxpayer can show reasonable cause or hardship. Additionally, those with a good compliance history may qualify for a First Time Penalty Abatement, which can save thousands.

6.     The IRS never makes deals to pay less taxes.

The IRS does make deals through the Offer in Compromise program, but only if it’s clear they’ll never collect more from the taxpayer. With the right circumstances, taxpayers can settle their debt for a fraction of what they owe.

7.     Once you file a joint tax return, you cannot get out of it.

While you can’t switch from a joint to separate return, Innocent Spouse Relief allows some individuals to separate their liability from their spouse. This relief can save thousands for those who qualify, especially in cases of divorce or separation.

8.     If your business owes money, you are not personally responsible.

Even if your business owes payroll taxes, you might still be personally liable if you were responsible for handling them. The IRS can pursue individuals for unpaid trust fund taxes, even if the business has closed.

9.     If you owe the IRS too much money, you will go to jail.

Most IRS cases involve resolving tax debts rather than criminal prosecution. Jail time is rare and usually reserved for severe cases like tax evasion or fraud, not simply owing back taxes.

10.   The IRS cannot take your house if it is homestead.

While homestead laws offer some protection, they don’t make your home completely immune from IRS action. In extreme cases, the IRS can seek a court order to seize and sell your home if other collection methods fail.

11.   Once you get audited, the IRS will never leave you alone.

The IRS audits fewer than 1% of tax returns and usually focuses on those with significant discrepancies or red flags. Once an audit is resolved, the IRS generally won’t revisit unless similar issues arise on future returns.

12.   Once you owe the IRS money, it never goes away.

The IRS has a 10-year window to collect taxes, after which the debt may expire. However, certain events can extend this period, and the IRS might pursue collection if substantial assets are involved.

To explore each myth in detail and see how these misconceptions might affect your tax situation, check out the individual blog posts linked here. Each one delves into the specifics, offering practical insights and advice to help you better handle and resolve your IRS issues.