There is a misconception that everyone needs to file their tax returns, no matter how much they earn simply to be accountable. The truth is, according to the tax code, millions of individuals every year do not need to file any tax returns. But with the government's stimulus benefits given to taxpayers, everyone wants to file hoping to get some share of this benefit.

Just who is a nonfiler? According to the IRS, a person who does not earn more than $3,000 from any number of sources does not need to file an annual tax return. This is also the amount you will have to make to be eligible for a stimulus check from the government. But if you earn more than $3,000 per year, you must file your tax returns. The $3,000 number also applies to families, therefore if you and your spouse earned more than $3,000 as a family, then you will need to file a tax return. The IRS has set up a Free File system to assist those nonfilers who intend to file.

The IRS Free File system is basically to enable people who do not earn much money to file their tax returns for free. It is open to over 97 million Americans who made less than $54,000 last year. Hence you do not have to engage companies like H&R Block to file for you, neither do you have to buy expensive online filing software. There are a whole host of companies that will perform your Free File for you. All the information you need about the Free File system is available from the Free File website. Just visit the site and make your selection of the company you would like to perform your Free File for you.

You may want to make your filing in order to take advantage of the stimulus benefit. The Obama Administration put forth this system to help stimulate the economy. Each person earning over $3,000 is eligible to get a $300 check from the government and families can receive up to $600. Are these measures working? That's anybody's guess. It appears to have had some effect on the stock market, but not as much on job creation. These checks are still available from the government, even if you are filing long past the deadline.

This year saw record numbers of nonfilers file their tax returns, many for the very first time. Millions of stimulus checks were sent out and, even though its effect on the economy is uncertain, there is a strong hope that such a system will again be in force in 2010. If it is, the Free File system will still be available for you if you are eligible. So if you are a nonfiler and you want to file, there are free and easy-to-use ways to get your taxes done fast using the Free File system.

An IRS levy is a wage garnishment on your salary that authorizes the IRS to deduct a substantial percentage of your wages to pay your tax debt. This happens as a last resort where the IRS will attempt to recoup the tax you owe them by taking upwards of 70-80 percent of what you make every month. Needless to say, this amount of garnishment leaves you hardly enough to survive.

But the purpose of such a move by the IRS is not to impoverish you; it is to get you to call them so that a more practical solution can be worked out. Most of the time, those who get subjected to IRS levies are recalcitrant taxpayers who have ignored attempts by the IRS to contact them whether by phone, letter or email. Since this is the primary purpose of a tax levy, you need to know how to deal with it.

One way to resolve a tax levy problem is called an Offer in Compromise. However, few people will be granted an Offer in Compromise because in order to qualify, you have to be quite poor and have hardly any assets that can be sold to clear your tax debt. There are, however, a few exceptions. If the tax levy disrupts your ability to provide basic needs of your family such as your mortgage or food, you can get it reduced. The IRS must leave you enough to pay for food and shelter, although that is about it. Other valid expenses that may reduce the tax levy would be essential medicines and child support.

The final type of Offer in Compromise is where your tax debt has been calculated wrongly by the IRS. This might be highly unlikely because the IRS personnel are well trained to determine your exact quantum of tax. Nevertheless, even the IRS makes mistakes once in a while and if you can prove that they did and that the tax burden you have is not really yours, your tax levy can be reduced by the amount of tax that you are not liable for.

In conclusion, IRS levies are designed to get your attention so that you will contact the IRS in hopes of resolving your debt. Your response should be to agree to a payment plan with the IRS. The payment plan will replace the levy and even if you may not be able to keep to the plan, at least it will buy you some time to work out a more permanent solution.

No one enjoys being the subject of an IRS audit. In order to keep on the right side of the IRS, it is important to know how to avoid being subjected to such an audit. So how do you determine what is deemed as a reasonable cause for an IRS audit? The fact is that there are certain things that will cause a red flag more times than not. One too many red flags and you are in hot soup. Here are just a few things that usually constitute reasonable cause for IRS audits.

In most cases, red flags are caused by deductions on your tax returns. Depending on what type of job you hold, you may make any number of tax deductions. It is inaccurate to say that most deductions cause a red flag; only a few do and the key is finding out what those deductions are and how to avoid problems that come by making them. Arguably the most common deduction is for donations to charities or political parties. These are legitimate deductions, subject to their amount relative to your total earnings. If your donations seem oddly out of line with your income, it will certainly raise doubts about its legitimacy. The logic here is that most people don't donate large amounts of money that are disproportionate to the amount of money they earn themselves.

Ex-IRS agents have revealed that one major reason for getting flagged is making deductions for a large number of dependent children. Although anyone can have a large family, these days it is a rarity. You would be better off not lying about the number of dependants you have just to make some extra deductions.

Another way you may create reasonable cause for IRS audits is by deducting things that don't actually apply to the business you are in. It is quite normal for small scale entrepreneurs to make deductions that are in the grey area, neither absolutely legitimate nor totally disallowed. But the key is not to overdo it. We all want to pay the least amount of taxes possible, but because there are so many things that can present reasonable cause for IRS audits, it is wise not to go to the extreme in your deductions.

Finally, if you have been issued with an audit, deal with it. You will stand a better chance of resolving the issue if you do not make any excuses to try to avoid it.

Just what is an IRS levy? You would usually be subject to an IRS levy only when all efforts by the IRS to collect taxes from you have failed. Thus, an IRS levy is the last straw when it comes to collecting back taxes. It is a tool that will freeze your assets so that the IRS can remove as much money from your bank accounts as they need to pay off your tax debt. Although it is the final means of retrieving taxes from you, an IRS levy can still be reversed.

The first thing to do would be to contact the IRS and discuss with them a payment plan. Accepting a payment plan will immediately lift the levy on your accounts so that you have access to your checking and savings; but the payment plan will usually take effect immediately. You could just agree to a payment plan so that your levy is reversed, giving you more time to think of what do in the long run.

If a payment plan is not right for you, you should consider applying for an Offer in Compromise. This offer is not granted to most people because in an Offer in Compromise you are allowed to pay less (at times significantly less) than what you owe. There are three main ways to qualify for an offer in compromise. The first way is to show that an IRS levy would impose intolerable hardship upon your family and you would not be able to meet your basic needs such as food, shelter, medicine and child support.

The second way to be eligible for an offer is by proving that you do not have the means to pay off your tax debt by the deadline. In such a case, the best thing to do is to suggest a lump sum payment that is close enough to the total tax debt that you owe. If the IRS is agreeable to the sum that you propose, they will accept your offer and cancel the remainder of your tax debt.

The final way is to prove that your tax bill actually isn't yours. If you show them a genuine mistake in calculation or some form of human error occurred, then you may qualify to have some or even all of your debt removed.

The key here to doing away with an IRS levy is to keep the all channels of communication open so that you are always making headway positively.

If you want to fully discharge your tax debt, you must have made your returns on time. However, fully discharging taxes that are from a return that was filed late is not possible. Tardy tax returns is likened to tax evasion; blaming a poor memory is no good, either. This is why it is not possible to obtain a full discharge if your returns are late. However, you may qualify for other forms of help from the IRS.

Late taxes can be partially discharged through an Offer in Compromise. At present, there are three types of compromises your can obtain from the IRS. The first type is where some severe hardship prevents you from paying your taxes in full. Hardship would include things like being laid off, serious illness, death of the breadwinner etc that threatens your ability to pay for basic needs like food, shelter, medicine and child support. Credit card payments or school tuition payments do not count and will not win you any clemency from the government.

The second kind of Offer in Compromise involves an error in calculating your taxes or in the amount that is actually your liability (a part of your taxes belong to someone else). This is the most challenging of the three kinds to prove since you basically have to explain to the IRS that they made an error and that you are better at doing your taxes than they are. If you can show that a particular part of your tax liability is, in fact, someone else's, you may be allowed to pay less than what you owe.

The third type of Offer in Compromise is where you are unable to pay your full taxes. The IRS will evaluate your total assets and how much money you are bringing home every week and determine exactly how much money they can expect to collect from you, minus living expenses. If your nett income is less than your tax debt, you can either pay off your debt in instalments or pay a reduced amount that you can afford. While discharging taxes filed late is out of the question, the IRS will be more than willing to work with you when it comes to reducing your tax burden.

So totally discharging your tax debt is not possible if your tax returns are late. Discharging taxes filed late is banned by the IRS, but if you respond quickly to your notices and talk to them about what you can do, you should be able tor arrive at an equitable solution.