Top 4 Ways the IRS Can Be Scary & Not Just at Halloween
Do you know what can be scary, not just at Halloween, but year round? Yep, you guessed it, the IRS . We would like to give you some words of caution about the IRS especially as we are nearing the end of October. At Molen & Associates, we highly recommend you focus on your taxes year-round, if you haven’t, then the perfect time to start is this Halloween!

 What is the IRS?

The internal revenue service (IRS) is responsible for the collection of income taxes and the enforcement of tax laws. It operates under the authority of the United States Department of the Treasury. The IRS handles the corporate, gift, excise and estate taxes. You may hear the IRS colloquially referred to as “the Taxman”.

Below are different Tax Situations that can be a Halloween nightmare:

1) Tax Audit

Tax Audits are one of the biggest fears many people face, sometimes even more that death. If you are trying hard to follow the entirety of the IRS tax code, audits are something you must learn about. A Tax Audit is a review and examination of your taxes by the IRS to verify that your income and deductions are correct according to the tax laws. A Tax Audit is started when the IRS decides to examine your tax return a little more closely.

Procedure for IRS Tax Audits:

Tax Audits are conducted by the IRS and by the state government agency over taxation.

The IRS uses several different methods for an audit. Here are a couple:

Computer screening:

Sometimes returns are selected based upon statistical methods. The IRS compares your taxes Returns against norms for the same returns. The IRS develops these policies from audits of random samples of all returns as a part of the National Research Program that the IRS conducts.


The IRS selects your returns if any issues are found. The IRS tries to audit tax returns as soon as possible after they are filed. Accordingly, most audits will be of returns filed within the last two years. The statute of limitations limits the time allowed to assess additional tax. It is generally three years after a return is due or was filed, whichever is later. These returns are then selected for audit and reviewed by an experienced auditor. Sometimes, audit letters are generated based on these policies without a human ever looking at the return. If auditors note something questionable, they will identify the items noted and forward the return for assignment to an examining group. If you are scared you may be at a high risk of an audit, feel free to call our office to discuss your situation and be aware of what triggers Tax Audits most frequently.

2) The   IRS ‘notices’ everything:

The 1040 tax form is what taxpayers use the file to pay their taxes with the IRS. This file is used to report wages, salary, pensions and other types of income. Taxpayers are required to file these types of income on 1040 forms, according to their situation. If you raise any red flags,  you may receive an official notice from the agency in your mail box.

In some cases, your reply to the notice will resolve the matter quickly. These types of exchanges of information with the IRS can be done using the U.S. Postal service to solve tax matters. While these are still technically an audit, they are commonly referred to as correspondence audits.

It is important to respond quickly to any tax notices you receive by the IRS. Make a quick response to IRS’s questions as soon as possible. Don’t skip any deadlines regarding notices from the IRS. Although these deadlines may be arbitrary dates, your response may be as simple as calling to ask for more time. As in any good relationship, communication is key. As an example, imagine if you ask your significant other to pick up some Halloween candy from the store via text. You don’t hear anything from them all day, so you assume they are busy working so you pick up the Halloween candy yourself. To your surprise, around 5pm, they stroll in holding a big bag of candy! While you are grateful they did as you asked, you are more frustrated because they didn’t communicate with you. This is similar to what I’m sure the IRS feels in many situations.

Remember that you can always hire an expert to review your IRS notice or audit and advise a best course of action. It is better to pay a professional tax firm such as Molen & Associates. We may not be able to fix all of your issues, but you will know that the IRS is being handled in the best way possible. Finding a firm that speaks the same language as the IRS and has a good reputation with the IRS is key. The fee from our tax firm may be much lower than potential fees from the IRS.

3)   Tax Penalties

The IRS tracks all your penalties & interest. They will reflect these amounts on your tax bill via a notice. These may happen if you do not file a 1040 or pay the correct amount of taxes by the filing deadline.

There are two types of tax penalties:

As the name indicates, late tax penalties will be applied if you file your taxes late. It is important to file your taxes by the April 15th deadline for personal returns and C-Corp returns or the March 15th deadline if you are an S-Corp or Partnership. An extension request must be made if you are unable to meet this deadline. A tax penalty will be charged for each month late the filing was done. A very important note to remember here – filing an extension does not extend the time you have to pay, just the time you have to file your income tax return.

Another type of tax penalty used by the IRS is known as underpayment penalty. It is typically implemented when you do not pay all of the taxes you owe throughout the year. A few main rules for the underpayment penalty include:

  • Withholding equals approximately 90 percent of your income tax obligation for the year.
  • Withholding equals 100 percent of your previous year’s income tax obligation.

In some cases, taxpayers are not subject to an underpayment penalty. The IRS waives the penalty for the following situations:

  • Taxpayer was unable to make sufficient quarterly payments due to a natural disaster, casualty, or unforeseen circumstance.
  • Taxpayer retired during the tax year.
  • Taxpayer became disabled during the tax year.

When your taxes are not paid in full and on time, a .5% penalty will be applied for each month of non-payment. Don’t forget the interest, which is compounded daily. Even at today’s low rates, they will add up quickly. Fore more information on penalties and interest, click here.

4)   How do liens, levies and garnishments work?

Your situation will worsen if you ignore the IRS communications and fail to pay in full. Common ways this happens is through liens, levies and wage garnishments. A lien is a legal claim against your property to secure payment of your tax debt, while a levy actually takes the property to satisfy the tax debt. A federal tax lien comes into being when the IRS assesses a tax against you and sends you a bill that you neglect or refuse to pay it. The IRS files a public document, the Notice of Federal Tax Lien, to alert creditors that the government has a legal right to your property.

A levy is a legal seizure of your property to satisfy a tax debt. Levies are different from liens.

A Lien is the public notice to all your lenders and is registered with your property. If a lien is listed on a property, you can’t sell the property without paying the lien holder first. The IRS will not release a lien until all your debts are paid in full or if you have an installment agreement in place.

The IRS has been accused of using the structuring arguments to improperly seize the taxpayer property that is unrelated to the transaction. This is now prohibited under the New IRS Reform bill, officially known as Taxpayer First.

The agency now seizes the taxpayer property only if it is shown to be derived from an illegal source that is related to any criminal activity.

Regarding the case of levying, the IRS will take money directly from that fund to pay off all your debt. The IRS will not only seize your property but also use your assets such as houses, vehicles, and properties to pay off all your tax bills.

In order for wage garnishments to occur, a court order i.e. served upon an employer is required. The employer will then deduct a portion of employee’s compensation to pay the portion of a creditor.

Beware and be ready when dealing with the IRS:

Do not forget to pay your taxes on time! Make sure you are ready to handle all tax terrors. Our tax experts at Molen & Associates are the best at working with tax preparation and will handle all of your tax and financial needs.

Contact us today at 281-440-6279! Our experienced tax advisors at Molen & Associates specialize in unraveling your tax headaches and love providing education to our clients. Do not stress anymore, we are on your side!

Clark Boyd

The Molen & Associates Difference

Mike Forsyth

“Super helpful and timely. This is our first year with them and we look forward to trusting them with our taxes and business books for years to come.”

Caitlin Daulong

“Molen & Associates is amazing! They run an incredibly streamlined process, which makes filing taxes a breeze. So impressed with their attention to detail, organization, and swift execution every year. Cannot recommend them enough!”

Sy Sahrai

“I’ve been with Mr. Molen’s company for few years and I felt treated like family respect and dignity. They are caring, professional and honest, which hard to find these days. Love working with them.”

Should I Open an HSA?

Should I Open An HSA Account? Are you considering a Health Savings Account (HSA)? If so, it is vital to understand what exactly an HSA entails. With this guide, you'll learn all about it: the advantages of an HSA and how it can help you manage your medical expenses....

Personal Finance Tips for Young Adults

As someone who has been working for most of their life, I wish there was someone out there who had shown me the correct way to save money for my future. Now that I am in my 30s, I have been getting better at saving money, but there are some personal finance tips that...

How to Track Expenses

There are many different methodologies, tools, tips, and tricks for tracking expenses, and it ultimately depends on your lifestyle and how actively and accurately you want to track them. This is information I’ve pulled from other sources and compiled into a few...

How To Accurately Record Commuting Mileage and Increase Tax Deductions

Increase Tax Deductions With the Business-Mileage Rule Using the Business Mileage tax deduction can be tricky. There are lots of situations that count while others do not. We don’t like commuting mileage. You should dislike it, too. It’s personal. It’s not deductible....

Bookkeeping 101

As a new business owner, you will certainly have some responsibilities you won’t be able to avoid. One of those non-negotiable part of your business is producing financial statements. It can be overwhelming trying to master a topic such as bookkeeping but don’t worry...

Bankruptcy – Everything You Need to Know

Everything you need to know Filing for bankruptcy protection is considered a statement on your ability to repay your debt to your creditors. Filing for bankruptcy will also put a halt to foreclosure or legal actions against you, and it stops creditors from calling and...

Top Tax Tips for 2023

Tax Refunds May Be Smaller This Year Plan now to learn these 2023 tax tips avoid surprises in the future! If you’re expecting a tax refund in 2023, it may be smaller than last year, according to the IRS. Your annual balance is based on taxable income, calculated by...

What is an EA?

Have you ever seen the title EA next to a tax professional’s name and wonder what it means? Or maybe you’re familiar with the title and you’re curious about the differences between an EA and CPA? Either way, in this blog I will be answering these frequently asked...

History of Federal Income Tax Rates: 1913 – 2021

The United States federal government levies taxes on the income of its citizens and legal residents. The Internal Revenue Service (IRS) is the agency responsible for collecting these taxes.  Federal income tax rates have changed several times since 1913, when the...

Familiarize Yourself With Tax Terminology

Yes, I know, tax terminology feels like a whole new language. For most people all of tax forms can be even more confusing than a foreign language. What’s the difference between itemized deduction and standard deduction? What’s Income tax?  These words and more tax...

Request an Appointment Today

7 + 6 =

Call us at

Pin It on Pinterest

Share This