Tax Problems

reviewed by Mark Badkar
June 12, 2023

Each year, the IRS publishes its Data Book which gives insight into taxpayer issues. You can read other IRS reports from various sources like the General Accountability Office, the Treasury Inspector General for Tax Administration (TIGTA), and the IRS advisory committees to glean more data into tax problems. Here are the six most common problems faced by taxpayers:

The Dangers of Your Tax Problems

While the IRS does not pursue criminal tax evasion cases for many people, the penalty for those who are caught is very harsh. They must repay the taxes with an expensive fraud penalty and possibly face JAIL TIME of up to five years.

Back Payroll Tax

The IRS is coming for their money, payroll taxes collected by employers make up more than 70% of all taxes collected.

IRS Tax Lien

Federal tax lien is the government’s legal claim against your property when you neglect or fail to pay a tax debt.

Unfiled Tax Returns

On average, 20.1 million owe taxes and cannot pay Over $539 billion is currently owed to the US.

Math error notices

Affects 1.9 million Americans annually and the IRS adjusts returns automatically by notice by mail.

Tax Audits

1.1 million audits conducted by the IRS – 89% of tax returns that are audited are changed by the IRS.

Demand Notice

IRS Demand Letter is a notice from the IRS stating that you owe them a certain amount of money from back taxes.

Wage Garnishment

Part of your wages will be sent to the IRS each check until making other arrangements to pay your overdue taxes.

Unpaid Payroll Taxes

Even paying employee taxes 16 days late results in a 10% penalty, if an IRS notice results in a penalty of 15%.

Underreport Income

An estimated 3 million Americans under report their income. IRS Automated Underreporter Program.


Affecting 29.5 million taxpayers annually and there are over 150 different types of IRS penalties.

Misclassification of Employees

Criminal penalties of up to $1,000 per misclassified worker and one year in prison can be imposed.

IRS FBAR Penalty

A willfulness penalty may be imposed on any person who willfully fails to file the FBAR, with the ceiling on the penalty being the greater of $100,000 or 50% of the balance in the account at the time of the violation

Evaluate your tax situation

By evaluating your tax situation, you can identify areas where you may be able to reduce your tax burden and make informed decisions about your financial future.


Navigating the Maze of Tax Problems: The Unyielding Power of the IRS

Tax problems can be daunting, overwhelming, and, at times, downright terrifying. This fear is largely rooted in the formidable power wielded by the Internal Revenue Service (IRS), the agency responsible for tax collection and enforcement in the United States. Understanding the gravity of tax issues and the IRS’s authority is crucial for every taxpayer.

The Formidable Power of the IRS

The IRS is a powerful federal agency, and its reach and influence should never be underestimated. With the authority to audit, impose penalties, and even pursue legal action against individuals and businesses, the IRS plays a critical role in ensuring tax compliance.

Alarming Statistics and Consequences

A look at the numbers reveals the stark reality of tax issues in the U.S.:

  • According to the IRS Data Book, for the fiscal year 2019, the IRS audited about 0.45% of individual tax returns. While this number may seem small, it amounts to hundreds of thousands of audits each year.
  • The IRS reported $5.3 billion in enforcement revenue from collections activities in 2020. This staggering figure underscores the agency’s effectiveness in recouping unpaid taxes.

Common Tax Problems Faced by Taxpayers

  1. Failure to File: Not filing your tax returns is a serious offense. The IRS can impose penalties that compound over time, turning a small problem into a financial nightmare.
  2. Underreporting Income: Intentionally or unintentionally underreporting income can trigger an IRS audit. Audits are stressful and can lead to significant financial penalties and interest.
  3. Unpaid Taxes: Owing back taxes can result in aggressive collection actions by the IRS, including wage garnishments, bank levies, and liens against property.
  4. Incorrect Deductions or Credits: Claiming deductions or credits inaccurately can also invite scrutiny from the IRS.

The IRS’s Arsenal of Enforcement Actions

The IRS has a host of tools at its disposal to enforce tax laws:

  • Liens: A tax lien is a legal claim against your property, including your home, car, or other assets, to secure the payment of taxes owed.
  • Levies: The IRS can levy, or legally seize, property to satisfy a tax debt. This can include garnishing wages, taking money from bank accounts, or seizing and selling your property.
  • Criminal Prosecution: In cases of tax fraud or evasion, the IRS can refer cases for criminal prosecution, leading to fines and imprisonment.

Avoiding and Resolving Tax Problems

  1. Timely Filing and Accurate Reporting: Always file your tax returns on time and report your income accurately. Utilize the services of a professional tax preparer if necessary.
  2. Address Notices Promptly: If you receive a notice from the IRS, don’t ignore it. Prompt action can prevent the situation from escalating.
  3. Seek Professional Help: If you owe back taxes or are facing an audit, consulting with a tax professional or attorney can help navigate the complexities of IRS negotiations and settlements.
  4. Payment Plans and Offers in Compromise: The IRS offers options like installment agreements and offers in compromise for those who cannot pay their tax debt in full.

The power of the IRS in dealing with tax problems is formidable and should never be taken lightly. Tax issues, if left unresolved, can lead to severe financial and legal consequences. Understanding the risks and taking proactive steps to comply with tax laws can save you from the stress and fear associated with IRS actions. Remember, being informed and prepared is your best defense against the daunting power of the IRS.

External References

Clinton F Wassor

Clinton F. Wasser, holding a Master of Science in Legal Studies of Taxation, brings a wealth of expertise in tax planning and compliance to his writing. With a career rooted in the workings of the tax landscape, Clinton navigates difficulties with finesse. Beyond his professional accomplishments, he generously volunteers his time to educate high school students about the nuances of taxes. As an author, Clinton marries his real-world experience with a passion for simplifying tax concepts. He has found that his technique empowers readers to better understand the world of taxation.
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