Don’t Take Tax Problems into the Coming Year

Tax problems – like IRS notices, audits and penalties – can be stressful. They’re even more stressful if you ignore them. As this year comes to a close, take these three steps to ensure you don’t bring any old problems into the new year.

Tax problems are pretty common

If you do have an issue, you’re not alone. Every year, millions of taxpayers face an IRS issue. The most common issues are:

  • Penalties: The IRS charges more than 40 million penalties every year.
  • Audits: There are about 1.4 million IRS audits each year – and some last well over a year.
  • CP2000 or underreporting notices: The IRS sends these notices to 4 million taxpayers every year. IRS systems automatically send them when income reported on tax returns doesn’t match information the IRS gets from employers and other payers. The mismatch triggers a notice that asks for explanation and proposes additional taxes.
  • IRS bills: Currently, more than 17 million taxpayers owe the IRS and can’t pay.
  • Tax identity theft: Millions of taxpayers have had their personal information stolen during the past couple years. These taxpayers are at an increased risk that fraudsters will file a false return under their name next year.
  • Unfiled returns: The IRS has information showing that more than 7 million taxpayers don’t file their required return every year.

It’s true that many IRS issues can take months to resolve. But that should not stop you from taking steps to put any tax issues behind you for next year.

Here’s what to do:

  1. Fully understand what happened, and why. When you investigate your issue with the IRS, you’ll need to get to the underlying cause. For example, what seems to be an underreporting issue could really be caused by identity theft. Understanding exactly what caused your tax problem will help you prevent it from happening again. Learn how to research your IRS account.
  2. Pick the best option or options to fix it. Determining all of your potential solutions to resolve your issue – and picking the best one — may take a little work. For example, if you have an IRS penalty, you’d have to take a look at the five ways to get penalties removed and decide which ones apply to your situation.
  3. Don’t wait. Get started now. Once you’re moving forward with a solution, make sure to send the IRS a complete request or response. This will allow the IRS to make a determination with all of your facts. It will also avoid miscommunication that can lead to a prolonged interaction with the IRS. Meeting IRS deadlines is essential to avoiding a premature IRS decision on your situation. If you’ve already missed the deadline, don’t let that deter you from trying to solve your problem.
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