Fix These Tax Problems Before the New Year…

December 28, 2016 : Allie Freeland

IRS notices, audits and penalties – really any tax problem, can send anyone into a panic attack. Here’s the truth: they are even more stressful if you ignore them. As 2016 wraps up, take some important steps to make sure you don’t bring tax problems into a new year.

Americans Face a Range of Tax Problems

Every year, millions of taxpayers face tax issues. So, what qualifies as a tax issue?

1 – IRS Penalties: 

Tax penalties are sent if a tax payment – whether from an individual or business entity – is delayed. In fact, the IRS charges more than 40 million penalties every year.

2 – IRS Audits: 

There are about 1.4 million IRS audits each year. There are multiple incidents that trigger an audit, like questionable deductions and credits, underreported income, home office and hobby claims, offshore earnings, over-reported losses, and even working in a high-fraud field.

3 – IRS Underreporting Notices: 

The IRS sends underreporting notices to 4 million taxpayers each 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.

4 – IRS Bills: 

Currently, more than 17 million taxpayers owe the IRS and can’t pay.

5 – 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.

6 – Unfiled Tax Returns: 

The IRS has information showing that more than 7 million taxpayers don’t file their required return every year. There are multiple types of Unfiled Return notices sent by the IRS, like a:

  • CP59 Notice
    The IRS has no record that you filed your prior personal tax return.
  • CP63 Notice
    The IRS is holding your refund because you have not filed one or more tax returns and believe you owe tax.
  • CP515 Individuals Notice
    The IRS sends this notice saying they have no record that you filed your prior tax return or returns.

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 in the upcoming year.

Action for YOU

So, if you have experienced one of the above tax problems, try not to drag the issues into the new year. Here are some good actions to take:

1 – Understand the issue:

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.

2 – Be solution-oriented:

Determine the potential solutions to resolve your issue and pick the best one. 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.

Don’t wait another moment:

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.

4 – Call upon an expert:

Tax can be complex, and most people do not have accounting degrees or professional CPA or EA credentials and are quickly overwhelmed by IRS notifications and tax codes. Don’t allow yourself to carry the weight of having to understand this complex field, and working directly with the IRS. Leave it to an expert. For example, a tax professional at H&R Block can represent you on behalf of the IRS.

Don’t let tax issues linger through the new year. Take steps to solve them now and avoid any possible consequences next year.

Connect with a tax professional near you at H&R Block.

Related Topics

Allie Freeland

Allie Freeland

Contributing Editor, H&R Block

Allie is the Contributing Editor of the H&R Block blog, Block Talk. She has been a practicing grammar geek since 2007.

Related Resources

IRS Letter 4213C – Reduced Installment Agreement User Fee Request Denial

Your request for a reduced installment agreement user fee was denied. Learn how to address letter 4213C with help from the tax experts at H&R Block.

Tax Debt Relief

If you owe a balance to the IRS, you may have several tax debt relief options. Learn more from the tax experts at H&R Block.

Don’t Pay an IRS Penalty Without Looking Into Penalty Relief

The IRS grants four types of penalty relief, but many taxpayers don't ever ask. Learn how to request penalty abatement from the IRS.

Can the IRS Visit Me at My Home or Business? Yes, but It Doesn’t Happen Much.

Yes, the IRS can visit you. But this is rare, unless you have a serious tax problem. Learn more and get help from the tax experts at H&R Block.