The short answer is because they have to. The Fresh Start Initiative Program that came into effect in 1996 requires the IRS to negotiate with taxpayers. There was a very serious problem where people were underwater and they couldn’t get from under their own debt to lead noble lives. So, the IRS was put in a position where they had to negotiate and, hopefully, come to a compromise. The basic premise of this was to help taxpayers that owed more in back taxes than they could afford to pay. However, from a logical standpoint, it makes perfect sense. If a person can’t pay a certain amount of money but they offer to pay a lower amount, it would be more beneficial to accept that lower amount than to chase after the individual for funds they cannot even produce if you caught up to them. The government noticed that the IRS’ old approach wasn’t working, it was hurting. If they kept going, it would result in people no longer putting their money into bank accounts, hiding their assets overseas, and trying to report as little as possible so their wages couldn’t be garnished. All that does is hurt the economy. When you look at both sides, the program has done wonders for both the taxpayers and the IRS.
As a side-note, our firm is currently working with the legislature in Tallahassee to try and pass a similar legislation in Florida. Although there is no state income tax in Florida, businesses are all subject to taxation in Florida.
There is also all different kinds of tax a business is subject to at the state level. Corporations have a corporate income tax, sales tax, and unemployment tax. Unfortunately, the ones who suffer under the State of Florida the most are the small businesses. We see it all the time in our office. Business owners come in pleading for relief from their insurmountable unemployment back taxes, sales tax back taxes, etc., and, as sad as it may seem, we just can’t help them on the state level like we can at the national level. So, we decided to do something about it. We’re working on passing legislation to create a mirrored version of what we have at the federal level. This way we can give small businesses here an opportunity to advocate for themselves. As we speak, the Florida Department of Revenue is garnishing wages, freezing assets, and taking whatever they can get. They don’t even need to ask for permission.
The IRS is not only required to meet taxpayers at the negotiating table, but the fresh start initiative also requires that the IRS send out multiple notices to give taxpayers an opportunity to work with them. We’re trying to do the same thing at the state to help a lot of these small business owners that are suffering from the heavy weight of back taxes. One client that I have right now, according to the State of Florida, owes $150,000 in sales tax. We’ve gotten some of it reduced off from a doubt as to liability standpoint but his business just can’t afford to pay that. He said, “I’ll have to close my doors.” We would hate to see that happen, so we’re working with the Florida Department of Revenue to come up with a compromised solution. The difference is that the Department of Revenue doesn’t have to come to the negotiating table like the IRS does. They could very easily say, “It is what it is”. Therefore, it requires a very strategic approach on my end to get my client the relief he deserves.
For Folks, Businesses, Individuals, Are You More Likely To Be Audited If You Have Existing Tax Debts?
Having an existing tax debt doesn’t necessarily increase your chances of being audited. Audits are based on tax returns. It may help to remember that there are different departments in the IRS, there’s a collections department and then there’s an audit department. They have entirely different jobs. The audit department reviews the returns to ensure their accuracy. So, if they find a red flag, that will likely cause an audit, not the fact that you have an existing debt per se. There are also random audits that occur from time to time. Some people are also fearful that filing an extension will activate the IRS audit radar, but that isn’t necessarily true either.
For more information on Tax Debts in Florida, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (786) 788-8756 today.
Let's Work Together! Call us Now!
(786) 788-8756 | (786) 788-8982