Simple Ways to Avoid Getting into Trouble with the IRS
Many tax experts believe that the biggest tax-related mistake you can make is knowingly evading paying your taxes. This mistake could lead to criminal prosecution as well as fines and other consequences. Whether you are an individual or a business, paying your taxes is a must.
However, not paying taxes is not the only mistake that you can land you in hot water with the IRS. There are other – often seemingly mundane – mistakes that could lead to you getting into trouble with the IRS. In this article, we are going to review some of them and how you can avoid running into trouble in the first place.
Any income and expense that gets reported in your tax return is worth documenting, which means keeping the related documents in order is a necessity rather than an option. When you face issues such as a tax audit, for instance, you don’t have to go to any trouble trying to verify your numbers.
Unfortunately, a lot of people still make the mistake of misplacing documents related to their income and expenses. This doesn’t just make dealing with audits and other issues difficult but could also lead to you filing an incorrect tax return, simply because you miss one or two entries.
Ideally, you want to keep your income and expense papers on record for several years, even as an individual. Fortunately, the IRS now accepts verified digital copies, so you don’t have to set aside a large storage space for storing documents.
Over- and Under-Reporting
Your tax return needs to be as accurate as it can be. Minor mistakes may be accepted in some cases, but that is not a risk you want to take when it comes to reporting your income and expenses. Over-reporting your expenses and under-reporting revenues can be seen as acts of tax avoidance.
These mistakes could lead to back taxes that aren’t so easy to pay, plus they can turn into bigger issues in the future when not handled properly – we will get to this in a bit. The best way to avoid mistakes in your tax return is by keeping your books in check.
Don’t wait until the end of the month before balancing your books. Make sure all expenses are written down as they occur and that revenues from various sources are managed properly.
We really cannot talk about problems with the IRS without talking about back taxes. This is the most common cause of tax liens and levies. $50 in back taxes is more than enough to cause bigger issues down the line.
The best way to deal with back taxes is by paying them. Additional issues can be handled with the help of tax resolution services. Make sure you use a reliable tax resolution services to avoid triggering additional problems and not solving existing ones.
So, how do you avoid getting into trouble with the IRS? Make sure your tax payments and return are always accurate and in order. Also, take care of problems as soon as possible. For instance, when you have problems with student loans, take advantage of the loan options available on the market. With the tips and tricks we discussed in this article, that should be very easy to do.