One of the most important steps you can take to ensure your tax return is processed efficiently and correctly is to provide all the information the IRS requests. Even if you become aware that a mistake has been made on your tax return, it’s still better to file an amended return rather than nothing at all.
Most people are aware of these common filing problems, but it’s helpful to review them each tax season.
- Failure to sign the return
- Failure to make enough estimated tax payments
- Filing late or not filing at all (even if you’re due to a refund)
- Math errors on your return that are the fault of the taxpayer, such as incorrect Social Security numbers or transposed numbers
- Using the wrong filing status (for example, claiming head of household when you’re single)
- Taking credits or deductions for which the taxpayer is not eligible. For example, if your income exceeds certain thresholds set by Congress, you cannot claim education credits.
If you miss a deduction or credit that you’re eligible for, it’s usually better to file an amended return than to risk facing a penalty and interest charges. In case you need assistance you can contact The Oasis Firm for help with your tax returns.
FREQUENTLY ASKED QUESTIONS
1. What is an audit?
An audit is a review of your tax return to ensure that the information provided on the return and reported to the IRS matches. If there are any inconsistencies, you may receive a request for more information or a notice of deficiency from the Internal Revenue Service (IRS).
2. What should I do if I receive a letter from the IRS?
If you receive a notice from the IRS, it is essential to review it immediately. The letter may state that additional taxes are due or flag an error on your tax return. If there is no error, you should report this to your tax preparer and keep copies of all correspondence.
3. What happens if I don't pay my back taxes?
If you ignore your unpaid tax debts, you could face many consequences such as suspension or revocation of a business license, driver’s license, and/or passport. The IRS may also file a Notice of Federal Tax Lien, which gives public notice that the federal government has a claim against your property. This could prevent you from selling or refinancing a house or other property. In some cases, the IRS can file a Notice of Levy, which allows them to seize cash and assets from bank accounts, garnish wages and place a lien on the property.
4. What should I do if I receive a refund?
Taxpayers often receive a refund because the tax return was filed early; estimated taxes were made or received through an employer. If you receive a large sum of money from a refund, verify that it is correct and be cautious when spending the money as refunds are often targets for criminals to file fraudulent tax returns.
5. What does "under reporter" mean?
An under reporter is someone whose withholding and income information does not match the IRS records. An under reporter may receive a letter or notice requesting more information about income, expenses, or credits to verify reported income. If you receive one of these letters, provide the requested documentation as quickly as possible to avoid further action.
6. What is an instalment agreement?
An instalment agreement lets taxpayers with a payment arrangement to pay the taxes they owe in smaller instalments until the debt is paid in full. A valid financial hardship must exist, or there would be no reason that the person could not pay the tax bill in full. The IRS defines four types of hardships that are acceptable reasons to request an instalment agreement.
TECHNICAL INFORMATION
1. What is 1099?
A Form 1099 is used by payers to report income other than wages, salaries, and tips. It reports interest paid, dividends, royalties, or any other payments made in the course of your trade or business. It is essential to keep copies of all your 1099 forms for tax purposes.
2. What are estimated taxes?
Estimated taxes are used to pay tax on income that is not subject to withholding. This includes earnings from self-employment, dividends, interest, rents, or alimony payments. These payments are due quarterly on April 15th, June 15th, September 15th, and January 15th. They are due on the following business day if any of those dates fall on a weekend or holiday.
3. What is a 1042-S?
A Form 1042-S is used by withholding agents to report certain income paid and tax withheld to residents of foreign countries. These forms are submitted annually or semi-annually and may be used for income reporting regardless of whether the taxpayer must file a return.
4. What does "gross proceeds" mean?
Gross Proceeds are used as a reference to payments from the sale of mutual funds, stocks, bonds, or any other investment. These payments are not subject to withholding and require the taxpayer to make quarterly estimated tax payments on April 15th, June 15th, September 15th, and January 15th of each year.
5. What is a Notice of Federal Tax Lien?
A Notice of Federal Tax Lien is a public notice that the federal government has a claim against your property. This could prevent you from selling or refinancing a house or other property. In some cases, the IRS can file a Notice of Levy, which allows them to seize cash and assets from bank accounts, garnish wages and place a lien on the property.
6.What is a levy?
In the most commonly levied assets, employers must withhold a percentage of an employee’s wages and send it directly to the IRS. This amount is sent to the debt owed until that debt is paid in full. In some cases, the IRS may seize intangible property such as bank accounts, brokerage accounts, and other assets.
Whatever the issues or problems with your tax return, you should act on them immediately to prevent a late filing. The problems and penalties associated with not filing your paperwork have a snowball effect, so if you have no idea how to go about it, call us at The Oasis Firm for expert tax preparation.
In this situation, it’s best to leave the issues to professionals.