Tax season is truly a stressful time for everyone because the IRS keeps a close eye on taxpayers. Things can get worse for the ones who get a notice from the IRS, or the CRA here in Canada. Receiving a notice can be a big concern because it means legal trouble in most cases. And unless you do everything asked of you perfectly, you can expect to get flak. To make things worse, even the smallest and unintentional mistakes are very hard to handle. Awareness is the key because then you know how to avoid the most common tax problems. Let’s be clear how about how to do exactly that to steer clear of any related stress.
5 common tax problems:
1. Not filing your return on time
Many taxpayers get in trouble because they don’t file their returns before the due date. You may not take the deadlines seriously but ignoring them can cause heavy penalties.
Doing it repeatedly can aggravate the issue and you may end up with a major problem. Moreover, when you delay filing the return, the chances of making errors while filing them are high.
Avoiding these complications is easy if you keep track of the deadlines and follow them. Having an expert to handle the returns is even better because they fulfill the responsibility on your behalf.
2. Not filing the return at all
While not sticking to the deadlines is problematic, not filing your return at all is a major issue. You may consider not filing it if you don’t owe taxes or have a refund in your favor.
But that’s not generally a good idea. In fact, you may end up losing your refund if you fail to file.
On the other hand, you might face serious consequences if you have a tax liability and still do not file your return. The IRS can impose a “Failure to File” penalty on such taxpayers, and it can be a heavy one that’ll likely wreak havoc on your family finances.
Furthermore, you might have to pay interest on the owing tax amount. If you want to avoid these penalties and interests, ensure that you avoid this second item on our tax problems list, no matter what.
3. More tax problems: You owe taxes but can’t afford to pay
Beyond these common issues, not being able to pay the taxes you owe to the IRS is a major concern. Several taxpayers face massive tax bills that they are unable to pay as a lump sum amount.
Experts at Travis W. Watkins Resolution & Accounting Firm suggest that you should request for a settlement. The best way to get one is by having a professional tax attorney to represent your case.
They can work out a settlement plan with the authorities, with an option to clear your liability in affordable installments. They may even negotiate a reduced tax bill for you through an Offer of Compromise.
4. Erroneous tax return
A mistake on your tax return is another of the top tax problems that can get you into trouble with the Internal Revenue Service. It doesn’t matter whether the mistake is unintentional or deliberate; it still is a mistake.
Even something simple can cause trouble, such as:
- Filing a wrong status
- Making mathematical errors
- Misspelling names
Then there are the major wrongs, such as claiming incorrect deductions or knowingly entering wrong information about your income. The best way to avoid such problems is by being truthful; be extra careful while filing returns.
If the IRS does notify you about such issues, be quick in making amendments and filing the return again.
5. Mismatched or underreported income
When you state facts about your income, they must always be true. If your return has mismatched or underreported income, you are likely to face problems.
In case the IRS finds discrepancies in the information in your return, they will definitely take action. It is advisable not to make such a mistake because the authorities will always discover if you are on the wrong side of the law.
Then they will send a specific form to notify you about the difference in the income. Seeking legal advice is the best recourse if you get a notice from the IRS in this context.
Conclusions on avoiding tax problems
Even the slightest tax problems with the IRS can bring big hassles. Therefore, it’s best to avoid them at all costs.
The best approach is to be regular, timely and accurate with your returns and taxes. Whether you are an employee or own a business, make sure that you calculate your tax burden correctly and file the returns properly too. Don’t leave anything to chance and seek professional services to be double-sure you’re filling out and submitting details correctly.