7 Frequent Tax Issues (With Options)

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By smarttaxservice

On the subject of doing all your taxes, it’s pure to really feel wired. Though most individuals can breathe a sigh of reduction after submitting their annual returns, tens of thousands and thousands of taxpayers face a wide range of tax issues that reach the stress yearly.  

We go excessive tax issues Individuals face as we speak that will help you put together for no matter could come your means. Be taught what every drawback is and find out how to clear up them with our useful tax ideas

Hoping to keep away from these tax points altogether? TurboTax helps you precisely report your earnings, declare deductions, and credit in an effort to really feel assured about submitting. 

Prime Tax Points Taxpayers Face Immediately 

After digging into the latest knowledge from the IRS, we’ve compiled essentially the most prevalent tax issues affecting taxpayers as we speak.

Notice: All statistics on this publish are from the IRS Knowledge Ebook, except one other supply is listed.

1. Tax Penalties

Whenever you fail to adjust to the tax code, you’re topic to IRS penalties. Penalties exist for not following submitting, reporting, or cost necessities outlined by the IRS. The everyday consequence for tax code errors is a civil penalty. And although it isn’t widespread, prison prosecution can be potential relying on the circumstances. 

In 2021, the IRS assessed practically 41 million civil penalties amounting to $37 billion in taxpayer {dollars}. About 82% of those penalties got here from particular person and property and belief tax returns. Of the person and property and belief penalties, the 2 commonest had been for failing to pay (51%) and estimated tax penalties for self-employed people (33%).


  • Failure to pay penalty
  • Estimated tax penalty
  • Failure to file penalty
  • Dangerous test penalty

Easy methods to repair it:

If you happen to obtain a discover of a tax penalty from the IRS, you need to adjust to all directions. You’ll wish to learn by way of the letter to confirm that the knowledge is appropriate and ensure to reply by the desired date. 

For instance, when you acquired a penalty for tax non-payment, you possibly can both pay what you owe or request a penalty waiver. If you happen to’re requesting penalty reduction, ensure you collect the mandatory documentation to assist your declare.

2. Unpaid Taxes

Tens of millions of taxpayers filed their tax returns, owed further taxes, and didn’t pay by the deadline. When you’ve got unpaid taxes, you’re hit with a 0.5% penalty for each month the quantity isn’t paid in full. On prime of this, the IRS will cost curiosity on the stability you owe.

Current knowledge from the IRS reveals taxpayers owe greater than $120 billion in assessed taxes, penalties, and curiosity from over 9 million delinquent accounts. If you happen to’re on this scenario, discover out about your choices for resolving this difficulty under.

Not too long ago, the IRS introduced that it was granting reduction for practically 5 million tax returns for 2020-2021 to assist those that owe again taxes. 

Easy methods to repair it:

The most effective plan of action to resolve unpaid taxes is to pay the total quantity to the IRS as quickly as potential. Doing so will imply that you simply owe much less in added penalties and curiosity over the long run. 

Not everybody will pay in full instantly, so take a look at these different choices for fixing unpaid taxes.

3. Math Error Notices

There are a selection of the reason why folks discover doing their taxes annoying and crunching the numbers is one among them. Final yr, the IRS despatched math error notices to thousands and thousands of taxpayers for errors like computational errors, incorrect values, lacking entries, and failing to satisfy eligibility necessities. TurboTax takes the guesswork out of taxes, simply reply easy questions and add your paperwork or meet with an knowledgeable to keep away from errors. 

On the subject of math errors, the IRS has extra freedom to go forward and proper your errors with out you having to regulate something. Learn the part under to see what you want to do when you get a math error discover within the mail. 

Easy methods to repair it:

Whenever you obtain a math error discover, learn it fastidiously. Relying on which discover you acquired, chances are you’ll owe taxes, have your refund adjusted, or your tax stability could also be zero (i.e., you don’t owe something but additionally don’t get a refund). 

You’ll want to reply to the discover inside 60 days of receiving it. If you happen to owe taxes, you need to pay them by the deadline. If you happen to don’t owe something, you continue to want to reply, however you received’t have to pay.

4. Non-Filers

Yearly, thousands and thousands of people and companies fail to file their required tax returns by the tax deadline. The IRS makes use of third-party data returns (e.g., W2s or 1099s) to determine non-filers, create substitute tax returns, and assess what taxes, penalties, and curiosity are owed.

Easy methods to repair it:

If you happen to miss the common or prolonged tax deadline, you need to file your taxes as quickly as potential. Then it’s essential to pay any taxes owed in full, as quickly as you possibly can. You’ll be charged a failure to file penalty of 5% on any excellent taxes for every month you’re late, along with curiosity. 

You probably have but to file however don’t owe taxes (i.e, you count on a refund), you received’t be charged any penalties or curiosity.

5. Tax-Associated Identification Theft 

Tax-related identification theft occurs when somebody steals your private data (e.g., your Social Safety quantity) to file a tax return and fraudulently declare a tax refund. Tens of millions of Individuals are suspected to be or are victims of tax-related identification theft yearly.

In 2021, the IRS issued practically 5 million Identification Safety Private Identification Numbers (IP PIN) to taxpayers coping with identification theft. IP PINs assist confirm your identification with the IRS in an effort to file your return.

Easy methods to repair it:

It’s necessary to nonetheless file your taxes on time, even when you’re the sufferer of tax-related identification theft. It’s best to obtain a CP01A Discover containing your IP PIN, and you should use it to file your taxes. If you happen to want an IP PIN, use the IRS’s Get an IP PIN software to acquire one.

Bear in mind to reply instantly to any notices from the IRS, and don’t overlook to go to IdentityTheft.gov to be taught what steps you need to take to guard your different monetary data as a sufferer of identification theft.

6. Underreported Earnings 

When a person’s tax return doesn’t match third-party data returns, that is thought-about underreported earnings. Underreported earnings is the main contributor to America’s tax hole, which is the distinction between the quantity of taxes owed to the federal government and the quantity that’s truly paid voluntarily and on time. 

Not solely is the tax hole a considerable amount of misplaced income, however the IRS should additionally spend time and sources on resolving earnings discrepancies. In 2021, over two million instances had been closed beneath the IRS’s Automated Underreporter Program, nevertheless it’s nonetheless estimated that $600 billion is misplaced yearly.

Easy methods to repair it:

If you happen to’ve acquired a Discover of Underreported Earnings (Discover CP2000), you need to overview the knowledge fastidiously earlier than deciding find out how to reply. If you happen to agree with the proposed modifications, mark this in your response and ship it out on time. You’ll have to pay any excellent taxes, penalties, and curiosity.

Even when you disagree with the discover, you need to nonetheless reply on time and supply a proof of why you disagree and any supporting paperwork. From there, you’ll work with the IRS to resolve any discrepancies.

7. Tax Audits

A latest tax refund stress survey discovered {that a} quarter of American taxpayers are frightened {that a} mistake on their annual tax return will trigger them to get audited by the IRS. In actuality, a lot fewer persons are truly audited. Actually, lower than one % (~739,000 taxpayers) had been audited in 2021. 

Though tax audits sound scary, they’re actually simply an examination of your tax return. The IRS checks your return to be sure that the knowledge you report is verified and correct. Find out about what to do in case the IRS audits your tax return under.

Easy methods to repair it:

First, learn by way of your letter to see what data the IRS is requesting from you. Subsequent, you’ll want to collect your requested paperwork and ship them to the IRS for verification. Be sure you reply in a well timed method and don’t miss the deadline laid out in your letter.

Audits conclude in one among 3 ways: no change, agreed, or disagreed. 

  • No change implies that your data is verified and no modifications are wanted. 
  • Agreed implies that you perceive and settle for the IRS’s proposed modifications. 
  • Disagreed means you perceive however don’t settle for their proposed modifications,  and can bear additional overview.

Don’t overlook which you could contact TurboTax Audit Help for assist when you’re ever not sure of what to do with a tax audit. 

How To Clear up Tax Issues: 4 Important Ideas

Whether or not you’re coping with a tax audit or have unpaid taxes, tax issues could appear formidable to resolve. It’s necessary to take a deep breath and keep in mind that these points are extra widespread than you’d suppose. Comply with the following pointers that will help you down the suitable path to repair your scenario.

Get Began As Quickly As Doable

If you happen to’ve acquired a discover or letter from the IRS, plan to reply by the designated deadline. Replying in a well timed method and supplying the mandatory documentation helps keep away from miscommunication with the IRS.

The IRS will study your response and any proof you supplied to again up your claims. This course of can take months to resolve, and beginning instantly prevents it from occurring longer than is critical. 

Perceive the Downside 

Understanding the problem is important to resolving it. All the time learn your letter fastidiously to see what the tax drawback is and what steps you need to take to repair it. Even when you don’t agree with it, observe all directions for responding and supply proof and data that again up your declare. 

Discover the Finest Answer for Your State of affairs

Bear in mind to all the time perform some research on what options can be found to you. It’s potential to attraction many sorts of tax issues like a tax audit or underreported earnings. You too can talk about methods to waive penalties or accommodate your monetary scenario by way of cost plans. 

It doesn’t matter what strikes you made final yr, TurboTax will make them rely in your taxes. Whether or not you wish to do your taxes your self or have a TurboTax knowledgeable file for you, we’ll ensure you get each greenback you deserve and your greatest potential refund – assured. 

Sources: IRS 12345678


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