Tax season is here, and while millions of Texans have begun filing their taxes, many may be unaware of the rules that apply to them. According to the IRS, more than 50 million Americans prepared their own tax return in 2015 without the help of a tax professional. With the tax code and forms being so complicated, it’s easy to make a mistake that could prove to be costly.
If you do make a mistake and are contacted by the IRS, you may find it difficult to navigate the legal process alone.
“The IRS has very strict deadlines that apply to tax controversies. If a deadline is missed, there may be no way around it,” Nicholas Souza, a Texas Legal participating attorney, said. “This is one of many reasons why it’s important for a taxpayer to get representation as soon as they hear from the IRS. The attorney or CPA will know the deadlines relevant to the taxpayer’s case and will know what needs to be done.”
So before you file that return, Souza says there are several issues every taxpayer should consider:
Before you claim numerous charitable deductions, make sure you’ve got the paperwork to prove it. A charitable deduction is defined as a gift made to a charitable entity. IRS rules require receipts or other records from the charity in order to claim the deduction on your tax return. Without documentation, the taxpayer may lose their deduction and possibly pay a penalty.
Failure to File, Failure to Pay and Accuracy-Related Penalties
When a taxpayer fails to file a tax return or pay the full amount shown on the return, penalties begin to accrue. These two penalties combined can be as high as 25 percent of the unpaid taxes. The accuracy-related penalty applies when a taxpayer underpays their tax liability because of their own negligence, such as failing to claim a source of income or making inaccurate representations of a deduction. Taxpayers who make these kinds of mistakes can pay a 20 percent penalty plus the additional tax owed.
Joint and Several Liability and Innocent Spouse Relief
When married couples file a joint tax return, they share liability for taxes from either spouse for that tax year. In situations where one spouse controls the finances, or hides significant income or other activity, this can result in the other spouse being liable for a tax debt they did not control. Some taxpayers in this situation may qualify for innocent spouse relief which will reduce their tax liability, but innocent spouse relief is difficult to get. Make sure you know what’s in your tax return for you and your spouse before you file.
Frivolous Issues Penalty
If a taxpayer makes an argument to the IRS that is not based in the law or regulations, they can be penalized. For example, claiming certain exemptions or deductions that do not exist or may not apply to the individual will result in a penalty. Some taxpayers try to argue that they don’t have to pay taxes on religious or moral grounds or that only federal employees are subject to federal income tax.
The IRS doesn’t consider these frivolous issues funny or interesting. How much will you pay for a frivolous issues penalty? According to the IRS website, the frivolous issues penalty is $5,000, plus any additional penalties, like inaccuracy or failure to file.
“While taxpayers have the right to contest their tax liabilities, no one has the right to disobey the law or disregard their responsibility to pay taxes,” says the IRS.
What To Do If You Need Help With the IRS
If the IRS contacts you about an issue with your tax return, the best thing you can do is get a lawyer to represent you. A lawyer with experience in tax law will be able to help you navigate issues with the IRS and help you get the best outcome.
Worried about the cost of a lawyer? Think about a legal insurance plan. If you’re a Texan, you’re eligible for one of Texas Legal’s prepaid legal insurance plans. You can access our network of over 500 lawyers around Texas, including tax specialists, and have your legal hours covered by your plan.
So when it comes to the IRS, make sure you play by the rules. And if you find yourself in a tax-related quandary, a good lawyer is the best solution.