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When The Tax Man Cometh - Pay or Die

Posted Mar 11th 2008 8:00AM by Deborah Owens
Filed under: Ways and Means, Money Talks

Who knew that Joe Louis the first African American Heavy Weight Champion of the world was dogged by back taxes for most of his life?

"Betrayed," an HBO documentary of Joe Louis, chronicles how the I.R.S. literally stalked and garnisheed most of this American icon's income until he married an attorney who was able to negotiate a fair settlement.

To this day, one of the major reasons people, celebrities in particular, experience financial difficulties results from not paying income taxes.

Most recently, Wesley Snipes and let's not forget another heavy weight champion Mike Tyson. However, tax liens are not limited to the rich and famous. If you are considering or have not filed taxes in a few years it could be a costly mistake and here's why -- PENALTIES!

Here's a primer on the on the types of penalties that the I.R.S. can levy ...

Failure to File

Let's take the first penalty----failure to file. According to the I.R. S. most folks who don't file actually would have received a tax refund. You only have three years to file for a refund so you could be leaving money on the table. If you are someone who procrastinates you can also file for an extension. You will need to send the I.R.S. a check for what you believe you owe. The failure to file penalty is 5% per month or a maximum of 25% on the amount owed.

Failure to Pay
If you don't file and owe money the penalties on the back taxes can really add up. The amount is 0.5% per month until the balance is paid in full. The I.R.S. recommends that you file and negotiate a payment plan. Yes, you can pay back taxes on an installment plan and you will have to pay interest and penalties.

Interest
If you owe back taxes the I.R.S. will charge you interest on the unpaid balance and the rate changes every three months.

The impact of the combination of penalties is how Joe Louis' situation went from bad to worse as his tax bill ballooned from 500,000 to over a million dollars. The longer you wait the more it will cost you in the long run. If you have a complex situation it makes sense to obtain representation from an attorney who specializes in tax law. You know what they say -- the only thing guaranteed in life is death and taxes.

www.deborahowens.com
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Reader Comments

(Page 1)

1. I allowed the government to compute my taxes and they sent a check for the refund. About a year and a half later, they contacted me saying I owed them money for the year they issued the check? I'm "The Bush Fly" and this is wrong! How did I make a mistake if they calculated my taxes? It's like going to a restraunt and paying the bill, then seeing a huge additional bill come in the mail. It's double billing and it's wrong. Somebody official needs to explain what happened! Now they are taking my current refund and my rebate check. Something is wrong with the IRS. With the ability to steal our identies, I thought this was fraud. I haven't heard a word from anyone officially.

Cecil Jones at 7:12PM on Mar 11th 2008

2. I learned the hard way to submit all information when you file, if you worked more than one job in a year, submit everything at once. I did an amendment last year and ended up owing money. I just paid off the full balance two months ago. They will make payment arrangments, but the article is so true it gets worse if you ignore it.

stacie at 10:46AM on Mar 12th 2008

3. That's too bad. No wonder I saw her at the celeb and millionaire club millionairecupid.com seeking a good gentleman for helps. Maybe her ablums and blogs are still posted there.

Davis at 12:03PM on Mar 12th 2008

4. AND THEY WONDER WHY PEOPLE DO ILLEGAL THINGS TO MAKE MONEY THAT THEY DON'T HAVE TO PAY TAXES ON.
WHEN YOU WORK OR OWN A BUSINESS, THEN THEY WANT TO KNOW EXACTLY HOW MUCH HAVE YOU MADE LAST YEAR.

WHEN WAS THE LAST TIME PRESIDENT BUSH WAS AUDITED?
THAT'S THE REAL KRIMINAL.

HE GET'S PAID, AND QUITE WELL - TO DO NOTHING MORE THAN KAUSE OF SENSILESS DEATH OF THOUSANDS AND FOR THAT HE IS KALLED "AMURDA KKK'S LEADER" I MEAN AMERICA'S

Up to 25% Off on Computers, Diamond Jewelry, Nintendo Wii Bundles... at 8:31AM on Mar 13th 2008

5. I owed taxes for 2005 and paid all in full for 2005. Now every year including this year I get a bill for $300.00 or more stating I owe interest on 2005. How do I pay interest on a bill paid in full? Get this...I called in 2006, 2007 and they circle completely around the question asked. Its a rip off. Its more but a lot of typing so I will leave it here. GGRRRRRRRRR

pamela at 9:26AM on Mar 13th 2008

6. Go to YouTube and check out Aaron Russo's piece on the Federal Reserve. It's all set up to rip us off. To bad they're to many of you that are frieghtened and don't want to take these greedy bastids on. We could bring then down if we unite. What they're doing to the American people is unconstitutional and illegal. Check it out.

Gee at 2:49PM on Mar 13th 2008

7. I am on disability since 1996 but the Irs is collecting money that that they say I owe for 1997 ($55,00 +) mind you I have been on disability as of June 1997 they said they have no records that go back that far so they estimated. I am in the process of getting a tax attorney I just wanted to let you know that they will do this even if you DON'T owe!!
Widow Brown

Mary H. Young-Brfown at 5:21PM on Mar 13th 2008

8. I am getting money taken out of my check for 1997 taxes that I supposedly owe, I was official disabled in December of 1996, started getting disability in June 1997. IRS says that I owe back taxes of $55,000 kind you I did not work at all in 1997. When i asked them to check, they dont have records back that far so they just estimated what they thought I should have made. Yes I work for GM/EDS but still did not work. Iam getting a tax lawyer to help but the IRS seems to just be making up what they want to make up. I lost husband in 2007 but he was sick with cancer and I really did not read mail real good, but the question is the same. On Disability since 1296 HOW!

Mary H. Young-Brfown at 5:33PM on Mar 13th 2008

9. Blogger#5 Mr. Gee, I agree with you 100% The IRS has GOT TO GO!!....We Need Change!!

Its bad enough that Americans are overtaxed, and they are squeezing dry our paychecks week after week, but for the IRS to go after so many hard working Americans penalizing them excessively, people who are already having a hard time just trying to make a living, it's downright Criminal!

As Americans we need to unite in every state where Federal taxes are being forced from the public and unify our voices to SHUT THE IRS DOWN!!!

Its high time that the IRS was finally shut down. A better system needs to be figured out that's more conducive in allowing the public to have more control over their hard earned money. Most Americans are Damn sick of the IRS!!!. Its not that Americans don't want to pay taxes, it's the harsh penalties, interest, the audits being forced on the American people, Its the lack of ability to seek redress, Its our inability to demand accountability from the IRS the same way they demand accountability from the public. The American public deserves accountability as to how and where their money is being spent or wasted. In 2008, Americans still have no say whatsoever in the amount they are being taxed from their paychecks. Something needs to change. This has gone on for far too many years. Its time to unify every voice and close out the IRS!!

There are many, many Americans who agree that something needs to be done about the IRS. What can be done? Can the American people start a campaign to put these Heartless IRS bullies out of commission once and for All !!!

PK at 7:49PM on Mar 13th 2008

10. yeah man the irs don't care what race or creed you are when it comes to the old mighty dollar, but they love pegging blacks the most

darkman at 8:04PM on Mar 13th 2008

11. Every year it seem like I have to pay them also, the first time I paid back , the person that didi my taxes send in false information than what she show me and the paper that I gave her, I pay that off, now here I go again, they the IRS change the way I file to the way they wanted it to be now I am paying again. I need an angel to help me pay back money that I need i shouldn't be paying. Because I am head of my household. I pay all my bills and the rent. I there an angel out there help.

Evelyn Thomas at 8:34PM on Mar 13th 2008

12. I WAS TOLD BY AN ACCOUNTANT THAT YOU CAN WAIT FIVE YEARS AND FILE. MY QUESTION IS HOW MUCH DO YOU HAVE TO EARN A YEAR IN ORDER FOR IT TO BE CONSIDER TO BE FILIBLE.

SHANIYA at 10:06PM on Mar 13th 2008

13. Shaniya - I believe you must file a tax return for earnings over $6,000 - I may be off a bit, but I think it's in that range. Any CPA's out here?

warren at 10:51PM on Mar 13th 2008

14. it's not only the tax money that they get but , my retirement fund was flagged with a NOTICE to stop withdraws and now I can not get any help from them other then a document stateing that the freeze and with holding of my funds should not have ever happend and i have that in typed letter to my account holder and a copy too me , but know one can tell me how to get my money back , can i get the intrest on my money . Everyone I talk to ( tax lawyers )say they only work on cases that deal with money that's owed to the I.R.S

Dewit at 10:52PM on Mar 13th 2008

15. I would rather deal with the Mafia than the IRS!!!!

Carol Woods at 11:00PM on Mar 13th 2008

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