Paying taxes is an essential civic duty, yet numerous successful Americans encounter IRS issues, whether intentional or inadvertent. Understanding these common pitfalls is crucial to sidestep potential troubles. Here are 10 ways taxpayers often face IRS challenges.
If you owe $10,000 or more to the IRS, contact our tax resolution firm at (331) 215-7663 for a free consultation or schedule an appointment here.
- Failure to File Returns: Avoiding tax returns, especially when anticipating a bill, can lead to penalties and legal repercussions, including imprisonment and fines.
- Incorrectly Reporting Income: Discrepancies between reported income and what employers submit to the IRS can trigger audits, whether intentional or unintentional.
- Not Reporting Foreign Income: Omitting worldwide income, including foreign sources, may result in substantial penalties for U.S. citizens and resident aliens (including GC holders and individuals on H1B, L1A etc)
- Ignoring FATCA laws: Subject to specific limits, not disclosing Foreign Bank, Stock and MF accounts and other financial accounts on their tax returns. Foreign Mutual Funds need their own special forms to be reported on. (FBARs are not filed with IRS, but need to be filed with FINCEN)
- Claiming Excessive Deductions: While deductions are valuable, exaggerating claims, like charitable donations, can result in issues with the IRS.
- Ignoring IRS Notices: Neglecting minor notices can escalate problems; addressing discrepancies promptly is crucial to prevent severe consequences.
- Engaging in Tax Evasion Schemes: Illegal activities, such as offshore account hiding or identity theft, can lead to criminal charges. Seek professional advice for legal tax reduction strategies.
- Misclassifying Workers: Misclassifying employees as contractors to save on taxes can result in back taxes and penalties if deemed incorrect by the IRS.
- Not Making Estimated Tax Payments: Failure to make quarterly estimated tax payments can lead to penalties and unexpected tax bills, particularly for self-employed individuals or two income families (especially when the withholdings for taxpayer and spouse are not enough)
- Engaging in High-Transaction or Cash Businesses: Businesses dealing primarily in cash transactions may face IRS scrutiny; maintaining thorough records is essential to handle potential audits.
Facing IRS problems can escalate swiftly, resulting in fines, penalties, or legal actions. Awareness of these pitfalls and adherence to tax regulations can help individuals maintain a clean record and avoid unnecessary complications. Seek guidance from tax professionals when in doubt.
For assistance with IRS problems or if you owe $10,000 or more in back taxes, contact our tax resolution firm at (331) 215-7663. We offer a free and confidential consultation to explore your options thoroughly and help you resolve your tax issues permanently. Contact us today!
