Causes for unpaid taxes

Answer 1

The most common cause for unpaid taxes is retirement distributions. This is not an official government assessment, just my experience judging but what I see on a daily basis as a Tax Consultant. Many people, specially in this type of economy, resort to pulling money out of retirement accounts (i.e. 401K, IRA) in order to make ends meet. Unfortunately this is one of the most common causes for unpaid taxes. First most people do not have the management company withhold enough taxes from their distributions. Most people think that the 10% penalty will do, however, conservatively you should have them withhold 45% of the distributions in order to avoid a tax liability. You have to remember that the penalty is just that, penalty; however, you are required to pay income tax on that amount as well. President elect Barack Obama has mentioned during his campaign that he will look at ways of easing some of this burden, however, I would not count on that until it is actually in place. Anybody looking to withdraw money early from a retirement account should follow the advice of professionals and withhold as close to 45% as possible or refrain from doing so altogether. Hope this helps. Roger Hadad, Effectur Inc, www.irs101.blogspot.com