10 Filing Mistakes that Could Lead to an IRS Audit or Investigation in 2021News, Offshore Account Update
Posted in on February 12, 2021
When you sign, seal and file your 2020 tax returns, will it be time to breathe a sigh of relief knowing that you can put tax season behind you for another year? Or, will you need to hold your breath in case the Internal Revenue Service (IRS) comes calling?
If you are like many taxpayers, you won’t quite know for sure. There are lots of mistakes that can lead to trouble with the IRS; and, even if you hire a tax preparer, this doesn’t necessarily mean that you are in the clear. Here is an overview of 10 common filing mistakes from Virginia tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group:
1. Filing an Incomplete Return
When you file your return, you must submit all requisite forms. In addition to Form 1040 and all necessary schedules, this includes your income source documentation as well.
2. Failing to Report Cryptocurrency Income
Cryptocurrency investors are going to continue to face greater scrutiny from the IRS. Those who fail to report their investment gains can expect to face audits, investigations and penalties.
3. Failing to Report Gambling Income
Gambling income is another area of focus for the IRS, with the rise in online gambling platforms increasing the number of taxpayers who need (but fail) to report their winnings on their annual returns.
4. Failing to Disclose Offshore Accounts
Most U.S. taxpayers who own offshore accounts have an obligation to disclose these accounts when they file their annual returns.
5. Improperly Claiming the Home Office Deduction
With the COVID-19 pandemic forcing taxpayers in Virginia and other states around the country to work from home, the IRS will pay particular attention to home office deductions in 2021.
6. Improperly Claiming the Conservation Easement Deduction
The IRS is also paying close attention to returns that claim deductions for conservation easements. The agency has targeted a high number of taxpayers for fraudulently claiming these deductions in recent years.
7. Improperly Claiming Other Deductions
Business deductions, charitable deductions and other itemized deductions are also potential red flags for revenue agents, particularly when taxpayers fail to provide supporting documentation.
8. Making Guesses or Assumptions
U.S. taxpayers need to complete their returns based on accurate information and a clear understanding of the Internal Revenue Code. Guesses and assumptions will be apparent to revenue agents, and they will not hesitate to ask questions when necessary.
9. Not Paying Interest and Penalties on Missed Quarterly Tax Payments
Independent contractors and small business owners need to make quarterly estimated payments. Those who fail to do so must account for this when preparing their annual returns.
10. Missing Tax Day
If you aren’t ready to file your returns on April 15, you should not simply ignore the deadline. Instead, you should file for an extension. Missing tax day amounts to tax evasion, and it can lead to substantial penalties in an IRS audit or investigation.
Request an Appointment with Virginia Tax Lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group
Questions or concerns? Feel free to get in touch. To request an appointment with Virginia tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, call 703-752-3752, email firstname.lastname@example.org or tell us how we can help online today.Share This Post