Most Common Types of IRS Tax Problems

By  //  November 16, 2020

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The American taxpayer will face specific challenges and difficult situations. Getting notified by the IRS that there is some issue is enough to make you feel anxious. Receiving a letter from the IRS will make any taxpayer feel stressed.

Keep in mind that there are different reasons behind this, and it doesn’t have to mean that you didn’t do the bookkeeping correctly. In this post, we bring out the most common types of IRS tax problems!

Errors when filling out

We know that filling out a tax return form can be difficult. You can make a simple mistake when filing the numbers. Or, you can enter the wrong income. When you identify your error, all you need to do is fill the 1040X form to do an amended return.

If a taxpayer owes more money due to the mistake, they should submit the difference as soon as possible, as this simple step will help you avoid the hefty penalties. The IRS will also correct any math mistakes and let you know about the corrections.

Mismatching income

The IRS will notify you if they determine that the income you entered doesn’t match with the one reported by your employer. They do this using a special form CP2000 Notice to let you know about the correction. Bookkeeping experts would advise you to wait for any notices during the summer, as this is when they send them for revision.

Not filing a tax return

If you don’t file a tax return when you are owed, you can lose the opportunity to obtain the money. Taxpayers have a total of three years to amend this issue. If you don’t file a return, you can face a penalty that can go up to 25% of your unpaid bill. This amount will be charged for over five months.

Unpaid taxes and penalties

When the IRS calculates that you owe money for unpaid taxes, they will reach out to you. Taxpayers will receive a CP14 form stating the difference that you have failed to pay.

According to bookkeeping professionals, this form indicates that you owe money due to missed payment or didn’t claim the correct amount. If you failed to pay your taxes or file the return, you would face penalties and interests. The IRS will reach out to you for unpaid penalties.

An IRS Partial Payment Installment Agreement (PPIA) is similar to any other type of installment agreement in that the IRS agrees to allow you to break down your tax debt into monthly installments in order to make it easier to pay

Tax levy

The tax levy is the seizure of your property if you aren’t able or didn’t want to pay the taxes. If the IRS decides on this step, you will be notified via one of the following forms: LT11, CP504, CP90, or CP91.

Tax lien

The IRS will file a tax lien in case you have failed to pay your debt. They send out Letter 3172 to you and your creditors to notify them about the government’s claims. This document gives the government the rights to the property or money over anyone else.

What to do when you receive a notice from ILS? 

We understand that receiving a notice from the ILS can be very stressful. However, it is best if you stay calm and read the letter carefully. Get help from a bookkeeping service if you think you need it. Companies like Bookstime offer help for tax payments.

A dedicated bookkeeper will assist you in presenting the right financial information to avoid errors. The best thing is that they don’t change your process. Instead, they adapt to your practices to suit your needs.

How to fill out W-4 according to bookkeeping professionals?

When it comes to W-4, there are specific changes. According to bookkeeping experts, the new form makes it easy for you to end the year with $0 instead of owning or dealing with returns.

If you have more than one job or file taxes together with a spouse, make sure to enter information correctly to get the proper tax rates.  It is advised that self-employed people and individual contractors use the Tax Withholding Estimator.