Tax Assessments: How to Avoid Problems with the Revenue and How to React if They Happenpiva

A tax assessment is a formal procedure carried out by the Federal Revenue Service when it identifies an irregularity in the tax obligations of an individual or company. It occurs when the tax authorities detect non-compliance with tax rules, such as errors in declarations, omissions, fraud or non-payment of taxes due.

Receiving a tax assessment can generate many doubts and concerns. If you have been assessed by the IRS, don't despair. We'll explain what a tax assessment is, why it happens, what can happen next and how you can prevent it.

Why have I been fined?

The Federal Revenue Service monitors the tax information of companies and individuals in detail. When there are inconsistencies, such as errors in declarations, non-payment of taxes, omissions or incorrect information, the tax authorities issue the assessment to formalize the collection and penalty. Some common reasons for being assessed include:

Errors in Tax Returns: Incorrect information, omissions or false data in returns such as the Income Tax Return (IR) or other ancillary obligations.
Failure to Pay Taxes: Failure to pay the taxes due, whether due to forgetfulness or lack of resources, can lead to an assessment.
Failure to comply with ancillary obligations: In addition to paying taxes, there are tax obligations that require periodic documents to be sent to the IRS. If these are not complied with, an assessment can also occur.
Irregular Commercial Transactions: For legal entities, the transportation of goods without an invoice or other irregularities in the issuing of tax documents are common causes for assessment.
Tax Fraud: Attempting to conceal or manipulate tax information can result in an assessment for fraud, which can have more serious consequences.

What can happen after a tax assessment?

After a tax assessment, the taxpayer has a number of options. The tax authorities can demand immediate payment of taxes and fines or, if there is a defense, start an administrative process. If it is not possible to resolve the situation amicably, the company may face more serious sanctions, such as:

fines and interest: the IRS can impose fines on the amounts owed, as well as interest on the unpaid amount.
Suspension of Activities or Blocking of Assets: In more serious cases, such as tax fraud, the IRS can suspend commercial activities or block assets and bank accounts.
Legal action: If the assessment is not resolved administratively, the IRS can resort to legal proceedings to collect the amounts owed.

What should my first steps be?

If you have received an infringement notice, follow these steps:

Check the Details of the Notice: Read the notice carefully and understand the nature of the error.Check that the information is correct and that the notice really applies to your situation.
Gather Documents and Information: If you believe there has been an error on the part of the tax authorities, gather documents that can prove your version of the facts.
Seek Professional Advice: Contact a specialized accountant or lawyer to assess your situation and decide whether it is better to pay the fine or contest the assessment.
Start the Defense: If you decide to contest the assessment, a defense process can be started, presenting arguments and evidence that justify correcting the fault pointed out by the IRS.
Collaborate with the IRS: Be transparent and cooperative. Omissions or attempts to hide information can make the situation even worse.

What are my options when it comes to tax assessments?

You have a few options for dealing with a tax assessment:

Accept and Pay the Fine: If you recognize the error or do not wish to contest the assessment, you can choose to pay the fine and regularize your situation.
Contest the assessment: If you believe that the tax authorities have made a mistake, you can file an administrative defense. You can present documents, evidence and arguments to justify your position.
Pay the debt in installments: In some cases, the IRS allows the debt to be paid in installments, making it easier to pay the fine and tax due.

How can you avoid tax assessments?

Prevention is always the best strategy. Some actions can help prevent your company from being assessed:

Keep Your Obligations Up to Date: Always keep tax deadlines in mind and comply with all tax and ancillary obligations.
Conduct Internal Audits: Frequently review your tax returns and documents to identify possible flaws before the IRS does.
Train Your Team: For companies, having a well-trained team is essential, as tax laws are complex and change frequently. For individuals, having a reliable accountant can help avoid mistakes.
Use Technology to Your Advantage: Tax management tools and software can be great allies in the tax organization of your company or individual, helping to avoid mistakes and maintain compliance with tax obligations.
Spontaneous reporting: If you realize that you have made a mistake, making a spontaneous report to the IRS can avoid heavy fines. This allows you to regularize the situation before the tax authorities identify the error.

In a nutshell

A tax assessment can happen to both individuals and companies and, although it is a formal process, it can be resolved with appropriate action. Maintaining tax compliance, educating yourself about your obligations and seeking professional advice when necessary are the best ways to prevent assessments and keep your situation in order with the tax authorities.

If you have been assessed, don't panic. There are options for correcting the situation, and with the support of qualified professionals, it is possible to resolve the problem efficiently. More importantly, adopting preventive measures can prevent your company from facing this type of situation in the future.

Be aware: Prevention is always better than cure. Organize your company, keep up to date with tax obligations and, if necessary, seek professional help. The IRS is paying attention, and so should you!