Mid-Year Tax Considerations for Avoiding an IRS Audit or Investigation in 2023News, Offshore Account Update
Posted in on June 30, 2022
As we pass the midway point of 2022, now is a good time for U.S. taxpayers to make sure they are in a good position to avoid an Internal Revenue Service (IRS) audit in 2023. While most taxpayers only think about their obligations to the IRS once a year, planning and strategizing throughout the year can be critical for avoiding unnecessary tax liability and IRS scrutiny. Here are some insights from Virginia IRS defense attorney Kevin E. Thorn, Managing Partner of Thorn Law Group.
Many Taxpayers Need to Make Quarterly Estimated Tax Payments
If your only source of income is a full-time job where your employer withholds FICA taxes from your paychecks, then you generally don’t need to worry about quarterly taxes. But, if you earn income from any other source, then you may need to make quarterly estimated tax payments in order to avoid liability for interest and penalties.
This includes income from investments, privately-held businesses and gig economy work (among other sources). Taxpayers must accurately estimate their tax liability each quarter and submit IRS Form 1040-ES along with the estimated amount due.
Offshore Accounts and Digital Assets Are Subject to Reporting and Taxation
Under federal law, U.S. taxpayers must report their offshore accounts and digital assets to the IRS annually. The IRS taxes income from all sources worldwide. The requirement to report offshore assets is determined based on thresholds—including thresholds based on the aggregate value at any point during the tax year. With respect to digital assets (i.e., cryptocurrency), taxpayers must report all taxable transactions—even if they execute multiple trades on a daily basis.
Failing to disclose offshore or digital assets to the IRS can have severe consequences—and the IRS is prioritizing enforcement in both of these areas in 2022. While most failures will lead to liability for interest and civil penalties, criminal prosecution is also a very real possibility.
U.S. Taxpayers Must Execute Tax Mitigation Strategies Before Year-End
While U.S. taxpayers have several strategic options for mitigating their federal income tax liability, they must execute their tax mitigation strategies before the end of the year. If taxpayers realize that they could—and should—have avoided tax when preparing their annual returns in 2023, at this point, it will generally be too late to fix their mistake.
From incurring legitimate business expenses to making charitable donations and acquiring properties that are subject to conservation easements, taxpayers can take a variety of steps to reduce the amount they owe. But, waiting too long (or failing to follow the rules that apply) can garner unwanted attention from the IRS—and this can cause taxpayers’ mitigation efforts to have the opposite of their intended effect.
Schedule an Appointment with Virginia IRS Defense Attorney Kevin E. Thorn
If you would like to know more about the steps you can—and should—be taking to minimize your tax liability and avoid unwanted scrutiny from the IRS, we invite you to get in touch. To schedule an appointment with Virginia IRS defense attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, call 703-752-3752, email email@example.com or contact us confidentially online today.Share This Post