Legal Question in Tax Law in Pennsylvania

Re: paying back taxes

First of all, it's good that you intend to take care of the problem before it explodes - the IRS is notorious for preparing returns for you ("Substitute for Return") based upon the information reported to them on your 1099s from your investment accounts. They then waste no time in filing liens and levies in efforts to collect. If you haven't received any notices from the IRS then you're in great shape to start the process. Even if you HAVE received correspondence, you can still take care of the problem without a great deal of trouble.

Where your PA tax liability is concerned, you're going to have to file your returns with the state as well. However, Philadelphia may have a WAGE TAX only, and NOT a "personal property tax," i.e., you may not be required to report investment income for the city.

Although you CAN approach the IRS directly, you would be well-served to hire legal counsel, as you are likely unaware of the specific provisions of the Internal Revenue Code, and you would be at the mercy of the Revenue Agent's instructions, which in many instances is incorrect and could result in an overpayment on your part of thousands of dollars. In addition, because you will be subject to penalties and interest, it is important to have a professional on your side who can argue for abatement of some - if not all - of those amounts. Further, you will have to make a choice between simply filing the returns and paying a "lump sum," going on an installment plan, or submitting an "offer in compromise," which can settle your account for much less than you actually owe.

Because you not only have the IRS to deal with, but also the Commonwealth of Pennsylvania and possibly the City/County of Philadelphia, you will probably want to opt for an attorney rather than one of the many "tax resolution services" which are out there. Those services do perform adequately, but they are staffed by "enrolled agents," which is IRS lingo for "person who has filed the right paperwork and has been approved by the IRS." Attorneys, on the other hand, are absolutely permitted by statute to practice before the IRS, as well as throughout Pennsylvania in both State and Federal Court as well as in administrative proceedings. Essentially, a service may or may not be able to help you with the Federal issue, but a licensed Pennsylvania attorney can assist you with ALL of your tax issues.

Our office practices state-wide in Pennsylvania and nationwide in the Federal system, and we would definitely be able to assist you in this matter. If you wish to discuss your tax issue further, please contact us for a no-obligation, confidential consultation. Thank you, and take care.

Marc D. Daffner, Esq.

Re: paying back taxes

Have your taxes prepared by an accountant or tax preparation service. You will then know for what years you have any liability and what the liability is (including penalties and interest). If the amount of penalties and interest warrant spending money on a lawyer or if you are unable to pay all the tax liabilities at the time you file, consult an attorney. My office is in Paoli, PA, we have three tax attorneys including a former CPA handling tax matters. I would be happy to discuss the representation and costs with you.

Good luck.