Staying off the IRS Radar Screen

Nothing strikes terror in the heart of American taxpayers quite like finding a letter in the mailbox from the IRS! In an effort to help you avoid that unpleasant scenario, provided below are examples of some common pitfalls to avoid if you don’t want the IRS lining up to be your new pen pal.

It’s surprising how many people mail their returns to the IRS without a signature. Before mailing, be sure to recheck everything and don’t forget to sign your return. An even better solution is to file electronically. Returns filed electronically have safeguards and controls to eliminate common errors. Additionally, the return goes directly to the processing center and the information does not have to be keyed into a computer by an IRS employee, which could result in additional errors.

Did you remember to include all income on the return? If you received a Form 1099 from anyone, be sure this income is on the return in the right place or you will receive a notice. Even if you did not receive a 1099 for work done independently, you are required to report the income. IRS receives copies of 1099s from banks, stock brokerage firms, rental agencies, and subcontractors and these are checked against income reported.

If you made estimated payments or paid your taxes quarterly, check the amounts and the dates the taxes were paid. Forgetting to include a payment is a frequent error that makes your tax burden look heavier. Many people forget to include the January payment, so keep in mind that the first payment of the year is sent in April, followed by June and September payments and concluding with the January payment for the fourth quarter of the preceding year.

If you file or pay late, you will receive a notice of delinquency and be charged interest and penalties, so try hard to avoid that. If you can’t pay taxes that are due by April 15, be sure to file the return on time with a note requesting an installment agreement to pay the remainder of taxes due.

Incorrect social security numbers will generate a notice or a disallowance of your dependents. Don’t mail the return without verifying that all social security numbers have been entered correctly. Transposing those numbers is more common than you’d think.

A few minutes of extra time reviewing your return will pay off in peace of mind and help you stay off the IRS radar screen.

For Tax Relief & Tax Resolution Resources CLICK HERE.

Mike Habib, EA

Greetings from the IRS

You’ve just picked up your mail and … uh oh, there among the ads, bills and too numerous offerings for credit cards is that official looking letter from the Internal Revenue Service. A feeling of dread comes over you…but don’t panic or toss it, and please DO open it. It might even be good news.

Usually, mail from the IRS is a notification that they need verification of documents or substantiation of an amount you have claimed on your tax return. Read the letter thoroughly. Determine what they are looking for, and then provide the information. Some of the most commonly missed items on a return are simple things: You forgot to sign the 1040; You didn’t attach W-2’s and required statements; If you’re paying quarterly, maybe you claimed the wrong amount as estimated tax; Or, perhaps the income you listed doesn’t match the figure that was reported to the IRS on a Form 1099 by someone who paid you during the tax year.

If you have the correct information, it’s a simple matter to fix. Make copies of your documents verifying the information on your return and send the copies back to the IRS along with a copy of the letter they sent to you. If, in fact, you didn’t include an amount on your return that should have been there, sign the form agreeing to the change and send them a check for the amount of tax due by the deadline date given for compliance. Usually, penalties and interest will be added—so, the sooner you comply, the less it will cost.

If your IRS letter advises you that your return has been selected for audit, you would be wise to seek professional advice. If you used a tax professional to prepare your return, such as an enrolled agent (EA), CPA or attorney, you should contact that person for help with the audit. If you prepared your own return, you may wish to contact us immediately. As an IRS Licensed Enrolled Agent, I am authorized by the U.S. Treasury Department to represent taxpayers before all administrative levels of the IRS for audits, collections, and appeals.

Now you’re thinking, what about that possible good news mentioned earlier? An unexpected refund, of course. Now, open that letter!

Mike Habib, EA

Solace for the Non-filer taxpayer

Has it been awhile since you filed a tax return? Feeling guilty? Scared? Don’t know what to do? Do you even need to file?

Many people become non-filers each year for a number of reasons. They lose the paperwork, they couldn’t pay, or they forgot about it. Sometimes illness, family crisis or depression plays a role. The list goes on and on.

If you are a non-filer, don’t procrastinate any longer. You may be hoping the IRS has forgotten about you, but that rarely happens. In truth, the more you wait, the more costly it will be if you owe money. And if you are due a refund, the statute of limitations on that refund expires three years from the date the return should have been filed. Don’t risk losing your money.

It’s not uncommon to feel overwhelmed when you haven’t filed for a while, but don’t despair. Lost paperwork can be reconstructed. If you owe, it’s better to file and negotiate an installment agreement because this will stop the late filing penalties although interest will continue until the tax bill is paid. Sometimes, penalties can be abated if the circumstances are serious, such as family crisis, illness or other catastrophic situations.

Contact a tax professional to help you get the monkey off your back. As an IRS licensed enrolled agent I can represent clients who have problems with tax filing and with the IRS. I can act on a client’s behalf and can help to get taxes filed, negotiate an installment agreement for those who can’t pay in full or, possibly, negotiate an offer in compromise to reduce taxes, penalties and interest. Don’t wait for the IRS to come looking for you; it’s far better to voluntarily come forward.

Every U.S. citizen and resident is required to pay his or her fair share of tax. No more, no less. The IRS has a matching program whereby all 1099s, W-2s, etc., are entered in their computers. They match this information with the tax returns that have been filed to insure that all income has been reported and that everyone who is legally required to do so has filed a return. So, if you haven’t filed for whatever reason, get moving before the IRS comes looking for you!