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San Jose tax fraud attorney, tax audit, tax fraud, tax fraud penalties, tax evasionBenjamin Franklin once said that nothing in this world is certain except death and taxes. This common saying is as true today as it was 200 years ago—paying taxes is a civic duty that is required of everyone in the United States. However, people often attempt to cheat on their taxes and avoid paying what they owe, and this can result in serious consequences. If you are facing a tax audit, you should understand the potential consequences of tax fraud or tax evasion.

IRS Tax Fraud Penalties

Tax fraud can take a number of different forms, including:

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tax audit, San Jose tax audit attorney, tax lawyer, tax returns, DIF systemThe prospect of being audited by the IRS is rather frightening, and many taxpayers do not know what to expect in a potential tax audit. However, only around 1 percent of people who file taxes are audited, and there is a great deal of confusion about what makes an audit likely. When filing a tax return, it is important to understand what the IRS looks for when deciding who to audit.

The DIF System

The IRS uses automated scoring known as the Discriminant Information Function (DIF) System to analyze tax returns. This system compares people’s incomes in a geographic area and looks at factors such as family size, how income is earned, and real estate property values to find any discrepancies that may require an audit. The IRS also uses an Unreported Income DIF (UIDIF) score to analyze whether a person is likely to have any income that was not reported correctly.

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IRS collection action, owe taxes, San Jose tax appeals attorney, IRS issues, tax lienIf, when filing your tax return, you owe taxes to the Internal Revenue Service (IRS) and you do not pay them at that time, the IRS will bill you for the taxes that are due. They will send at least two notices. Additionally, if taxes are not paid after you receive a final notice, the IRS will begin to take collection actions. These actions can include applying the amount of your future tax refunds to the amount due, or seizing your property and financial assets.

If you are unable to pay your taxes, you are likely already having financial difficulties. Moreover, if you receive a notice that the IRS plans to initiate a collection action, you may worry about the possible consequences. In these cases, an experienced tax attorney can help you appeal the IRS’s decision through one of the following procedures.

Collection Due Process (CDP)

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San Jose tax attorney, tax penalty abatement, FTA waiver, tax requirements., tax returnIf you are unable to file your tax return by the April 15 deadline, or if you cannot pay the taxes that are due at that time, you are likely experiencing financial hardship. Unfortunately, this hardship will only be compounded by the penalties that the IRS charges for failure to file or failure to pay taxes. However, you may be eligible for relief through a first-time penalty abatement (FTA) waiver.

What is FTA?

The IRS created the FTA waiver in 2001 to encourage compliance with tax requirements. Under this program, both individuals and businesses who have been compliant in the past can receive amnesty for penalties levied against them.

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gift tax, transfer taxes, San Jose tax attorney, estate tax, gift tax returnIn the United States, we are all too aware of the taxes that affect our everyday lives, such as sales tax and income tax. However, there are additional taxes that apply in special situations, including when someone leaves assets to his or her heirs after their death and when a person gives someone a large gift of money or property. These taxes are known as transfer taxes, and people should be aware of the tax laws that apply in these situations.

Estate Tax

When a person dies, taxes may apply to the transfer of his or her property to his or her heirs. A complete accounting of one’s assets will be made, including cash, real estate, investments, and business interests, using the fair market value of these items. The total value of this property is known as the Gross Estate. Deductions from this amount may apply for debts, expenses related to estate administration, property left to charities, and property left to a surviving spouse.

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