Common Tax Problems? You’re Not Alone.
Does tax season make your blood pressure rise? If you are like many Americans, taxes are more than a nuisance, they are a source of real stress. For some, the angst of taxes comes from organizing forms and receipts, others fear making a costly mistake in their tax filing. Many fear the thought of having the Internal Revenue Service (IRS) come looking for them. The good news is that you’re not alone. Most taxpayers face common tax problems at one point or another.
If you receive a notice from the IRS, there is no need to panic. Common tax problems include those you can resolve simply, as well as those you can manage with a bit of help.
Missed Deadlines – Late or Unfiled Tax Returns
Every year, the IRS has clear deadlines for personal and business taxes. Whether you’ve missed a regular or extended deadline or have failed to submit your taxes for the year, in the eyes of the IRS, you are considered a Non-Filer.
But, of course, the IRS has its own methods of tracking down overdue tax filings. Using information from business returns, such as W2s or 1099s, the IRS can identify Non-Filers. In other words, if you have missed filing your personal taxes, but your employer has reported your earned income, the IRS knows you have failed to file a return.
In the United States, millions of individuals and business owners fail to file their tax returns by the appropriate deadlines. Where the IRS has enough information, they can create substitute tax returns—including assessed taxes, penalties and any interest charges—and submit them on your behalf.
If you’ve missed both the IRS tax deadline and the extended deadline, it is still important to file your taxes. Make sure you pay any money owed if you are able. If you expect a refund and don’t owe any money, you won’t be charged interest or penalties.
If you owe money and don’t pay in a timely way, you’ll be charged interest and penalties, including .5% per month on outstanding taxes. Missed deadlines are among the most common tax problems in this country.
We all make mistakes. When it comes to filing your taxes, mistakes can come with heavy financial penalties. When the IRS spots an error on the taxes you’ve filed, they will let you know and assess any penalties. Common tax problems related to simple errors include:
Math errors—If the IRS spots a math error on your return, they will generally fix it and let you know the result. In other words, you could have an unexpected return, you may owe nothing but also receive nothing, or you could owe taxes you didn’t expect.
In 2022, over 12 million taxpayers received math error notices from the IRS, for missing entries, incorrect entries, failing to meet eligibility requirements, etc. If you receive a math error notice from the IRS, be sure to respond within 60 days, even if you write to let them know you disagree.
Underreported Income—If you have income from multiple sources, it can be easy to miss reporting from one source and misrepresent your income on your taxes. Because the IRS has access to records of wages paid by employers, it is easy for them to spot discrepancies between income earned and income reported.
If the IRS sends you a Notice of Underreported Income, it is important to review it carefully and respond on time. If you agree that you’ve made an error and will owe further tax, be sure to respond and send your outstanding balance on time. If you disagree, respond directly to the IRS, with an explanation and any supporting documentation. Be sure to keep copies of your communication.
When it comes to errors made on your tax return, whether you agree with the IRS or not, it is important to respond with as much supporting documentation as possible and, if you owe money, pay as much as you are able.
Ignoring IRS Notices
If you’ve made a mistake on your taxes or failed to submit them on time, the IRS will reach out to resolve the issue. At first, you will likely receive notification of your error by mail. You will be notified of any penalties and fees that you owe.
Two of the most common penalties assessed by the IRS are Failure to Pay and Estimated Tax for self-employed taxpayers. Others include Failure to File penalties and Bad Check penalties.
If you disagree with the assessment made by the IRS, it might be tempting to ignore their notifications. Rather than let the notices pile up, or escalate to aggressive phone calls, consider enlisting the help of a qualified tax team to help you navigate your tax-related issues and get the IRS off your back.
Giving in to Aggressive IRS Tactics
What happens if you end up in a dispute with the IRS? If you ignore IRS notices, they will increase in frequency and their level of aggression.
When you think of common tax problems, you might think of some of the tactics often feared by taxpayers—harassing phone calls, tax audits and IRS officers showing up at your home or place of work. The IRS uses these tactics to encourage quick resolution.
Naturally, many taxpayers are intimidated by this kind of aggression. As a result, rather than risk further trouble or stress, many simply pay the amount the IRS says they owe.
Giving in to this pressure too quickly, when you suspect you don’t owe as much as they say, can leave you paying more to the IRS than you should. To avoid paying more tax than required, think about enlisting a team of tax professionals to stand with you, in your corner.
Assuming You Need to Go It Alone
Among common tax problems most easily resolved is the assumption that you need to face these issues alone. Working with a team of tax experts delivers several benefits, from immediate peace of mind to the potential for a reduced overall tax burden.
Tax professionals are not only up to date on current tax laws, but they also understand the best ways to work with the IRS. If a tax team applies for an Offer in Compromise on your behalf—an attempt to settle with the IRS for less than the full amount they claim you owe—all IRS communication, including notices and phone calls, will come to a stop.
An effective tax team will negotiate on your behalf and potentially reduce the amount of taxes you owe. Not only do you not have to face common tax problems alone, but you’ll very likely be better off with the right team on your side.
At Franskoviak Tax Solutions, we have helped thousands of clients with tax problems for more than 30 years. We provide comprehensive tax services with first-class expertise and a personalized, boutique-style approach. Speak to our team about personal and business taxes, IRS tax deadlines, payroll taxes, IRS tax relief and tax problems such as IRS tax notifications, payroll tax debt, delinquent taxes and more.
Start with a free consultation—we’re here to help you work through common tax problems as well as those that are more complex. We will communicate with the IRS and, where necessary, negotiate on your behalf.