Why do taxpayers render the same mistakes over and over again? Taxpayers that have delinquent tax problems with both the IRS and state taxing agencies almost always seem to make three avoidable tax mistakes. Although not the sole causes or even primary cause of their tax problems, these mistakes aggravate their tax problems, often triggering a bad situation or making it worse.
1. Not Keeping Good Records Of Your Finances
If you don’t already know the following truth, please remember it today. Both the IRS and the state taxing agencies care if you keep good financial records. They expect your finances to be in order. The majority of audits are correspondence audits because such records have been kept. Financial records and receipts cannot be disposed of after you file your taxes. You need to keep them on hand for at least 5 years and 10 is an even safer bet.
If you have failed to keep good records and you experience a tax controversy, the nightmare of proving the truth of your case and finding a reliable way to resolve it will only get worse. Be smart about your taxes and keep good records. Take the time to ensure your future financial safety.
2. Failing To Report All Of Their Income
Yes, all income is taxable and all income must be reported. It does not matter whether or not you received a reporting form from an employer. Even if the employer forgot, it is still your responsibility to report the income. Such discrepancies lead directly to audits and tax controversy cases.
In the 21st century, many people have side jobs or side projects or even profitable hobbies that make them extra money. Such income needs to be reported. Yes, your baseball card collection is your passion, but if you make lots of money selling cards on eBay, you need to report the income. If you make money playing fantasy football or gambling in Vegas, it needs to be reported.
3. Mixing The Business With The Personal
It’s true that in the modern world it is harder and harder to separate the business from the personal in many industries and fields. Still, if you have a doubt whether something is business or personal, check with your accountant. Do not cut corners by trying to deduct the entire cost of a family vacation because you bumped into a client at a resort and had a drink.
The stories of how tax controversy clients justified such deductions are not just laughable, but also downright dangerous. A tax controversy case can be expensive. There is no reason to place yourself in the cross hairs of the IRS by cutting corners and making foolish mistakes. Even if you might save a little money today, it could cost you big time in the future.
Both The Tax Resolution Institute and Washington Tax Services provide quality tax resolution services to their respective clients. As respected tax resolution specialists and experienced enrolled agents, they come across the same tax problems day in and day out. By not falling into the trap of one of the three avoidable tax mistakes listed above, you can help ensure your financial safety in the future.