Getting audited is every taxpayer's worst nightmare. Fortunately, most people won't get audited. However, they will experience a host of other tax problems, from simple filing errors to missing deadlines. Here are three common tax problems and how to solve them.
Miscalculations and computation errors
These are most common with individuals who don’t use software to keep their books or process taxes. Choosing to add your figures individually is a viable option, but it can lead to significant problems down the road.
The best-case scenario is that the IRS detects and corrects your error and notifies you. A more severe consequence is that you end up paying more than you actually owe.
With computation errors, your math is right, but your entries are wrong. You might input the wrong figures in your taxable income and estimated tax payment entries.
The solution is simple: Get the best tax software you can find and sidestep any problems with the IRS.
Missing your deadline
Tax deadlines apply to everyone and are usually on the same date every year. However, most people push off filing their taxes until the deadline is dangerously close. We can chalk it up to forgetfulness, procrastination, or a combination of other factors.
Tax deadlines, while important, aren't absolute. You can file for an extension, and receive it with nothing more than paperwork processing. Unfortunately, most people don't do this, and they end up missing the deadline completely.
If you're due for a refund from the IRS, there are no penalties for missing your date. Otherwise, you'll be charged failure-to-file and possibly failure-to-pay penalties. This is terrible news since nobody wants to pay a penny more than they owe.
The good news is, you can still file and submit your taxes. Plus, the sooner you file, the less you'll pay in penalties. If you won't make it to Tax Day, remember to file for an extension.
Receiving a notice from the IRS
To be clear, a notice from the IRS is very different from being audited. It's easy to panic upon receiving the letter in the mail, but you should find out the issue before freaking out any further. It could be as simple as outstanding obligations or even an error on your forms.
Depending on your situation, contacting the IRS may be a smart first step. A revenue officer can explain things to you, and even provide advice on how to proceed.
Contrary to popular perception, the IRS can be understanding about some tax issues. For example, if you owe back taxes and have been consistent in the past, it's easier to agree with a revenue officer. That way, you can also resolve your issues without hiring a consultant.
Sometimes, tax problems get more complicated than any call to the IRS can handle. In this case, it's a good idea to hire a professional. You want someone with the proper credentials and track record for your specific circumstance.
The Bottom Line
Nobody wants problems with the IRS. However, these problems do arise, and they require a solution. The good news is that you can find help everywhere, from visiting helpful online blogs to hiring a professional.