Simple Mistakes Can Land You in Hot Water with the IRS
Paying careful attention to information and following tax rules can prevent simple tax return mistakes that add up to hefty IRS fines and penalties.
Five Common and Costly Tax Mistakes
Although simple, unintentional errors on federal tax returns don’t usually cause significant problems, the IRS considers some tax errors serious enough to impose steep fines, increased taxes, and even jail time.
Failure to File
Taxpayers who exceed the income threshold for their filing status and age must file tax returns. The penalties for failing to file a tax return include: additional interest, currently at four percent annually, and penalties up to 25 percent of the total tax due. Taxpayers who make frivolous arguments for failing to file taxes can face penalties up to $5,000 and possible jail time.
The IRS imposes steep penalties of up to 25 percent on taxpayers filing late tax returns. To avoid penalties, taxpayers can file a six-month extension to file late tax returns, as long as they are postmarked by the required filing date. Unsigned returns are rejected by the IRS, so they are considered late or not filed at all, even if filed on time.
The IRS requires all income to be disclosed, even if it’s less than $400 from freelance work which is exempted from self-employment taxes. Income must also include overseas gains from offshore banking and foreign income. An overseas rental property that seems hidden from the IRS could lead to large fines and penalties that are difficult to pay.
Missing or Incorrect Information
Missing and/or incorrect information is a common mistake on tax returns. Omitting a section of the return or accidentally putting information on the wrong line can lead to penalties. A simple mistake like putting information on the wrong line or wrong form could prompt a tax audit. An error that results in a favorable taxpayer outcome may be interpreted by the IRS as tax fraud.
Accidentally adding or omitting a digit on a tax return can make a big difference. Writing down $20,000 in mortgage interest instead of $2,000 won’t typically trigger an IRS investigation, but it could change the tax liability. If a math error results in lower taxes, the IRS will likely require additional payments plus accrued interest.
If you need help with IRS tax issues in Las Vegas, Nevada, contact a tax attorney at the Randolph Law Firm in Las Vegas at 702-757-7777 for a free consultation today.