Many taxpayers feel like they have a good grasp of the tax filing process right after filing their taxes. Unfortunately, over the course of the next year, much of that knowledge goes out the window. Either through not thinking about it anymore, updates to the tax code, or a change in financial situation, taxpayers have to get back up-to-date each year to file again in April.
It can be even more confusing when you get a letter from the IRS asking about taxes you filed a year or two ago. The good news is that when using a reliable tax attorney, you will have someone on your side to advocate for you in dealing with the IRS, let you know your options, and help you avoid any unnecessary interest or tax penalties.
Common Tax Errors According to the IRS
The Internal Revenue Service (IRS) provides a checklist of common errors when preparing your tax return. Going over these common errors can prevent some of the most common reasons for having the IRS delay your refund, request clarification, or issue an underpayment notice. Some of the checklist items include:
- Submitting your tax return electronically to ensure greater accuracy. The e-file system often detects common errors, sending it back to the taxpayer for correction. The IRS expects about 90% of individuals to file their returns electronically in 2020.
- Choosing only one correct filing status.
- Enter the names and taxpayer identification numbers for everyone listed on your return.
- Signing and dating the return. If it's a joint return, make sure your spouse also signs and dates the return.
- Use the correct mailing address from the tax form instructions.
- Use the correct postage on the envelope.
- If you owe tax, enclose a check or money order made payable to "United States Treasury" with your return and include your name, address, taxpayer identification number, daytime telephone number, tax form, and tax year on the payment.
- If you're due a refund and requested direct deposit, double-check your routing and account numbers for your financial institution.
- Make a copy of the signed return and all schedules for your own records.
Not Getting Paper Copies of Tax Forms
More financial information is going paperless, including bank accounts, health insurance, employment benefits, and investment accounts. This may mean that taxpayers who were used to getting a 1099 or other tax form in the mail will be getting those online. Taxpayers may forget about some of these financial accounts or not get an email of the tax form availability. Taxpayers are still liable for reporting all their tax information, even if they forgot about the accounts or never got a tax form in the mail.
Changes From Tax Year 2018 for Tax Year Filing 2019
There has not been a significant overhaul of the tax system in the past year. However, taxpayers are still responsible for calculating their taxes based on the existing tax laws for the tax year in question. One area of evolving tax treatment involves virtual currency. As we wrote about before, issues like Bitcoin and cryptocurrency taxation and even video game virtual currency are leaving a lot of taxpayers confused about how to handle virtual currency.
According to the IRS, “taxpayers who engaged in a transaction involving virtual currency will need to file Schedule 1, Additional Income and Adjustments To Income. The Internal Revenue Code and regulations require taxpayers to maintain records that support the information provided on tax returns. Taxpayers should maintain, for example, records documenting receipts, sales, exchanges or other dispositions of virtual currency and the fair market value of the virtual currency.”
Tax Issues for Maryland Taxpayers
An experienced tax attorney will be able to handle IRS documents and information requests, respond to IRS tax notices, or help you negotiate with the IRS to avoid heavy penalties or assessments. If you learn about an IRS audit or investigation, contact an experienced Maryland tax attorney. Contact Gabaie & Associates, LLC for a free consultation on your state or federal tax issue at (410) 862-2198.