Don’t Make These 5 Costly Mistakes When Preparing Your Income Tax Returns in 2021
Posted in News, Offshore Account Update on February 26, 2021 | Share
When it comes to preparing your annual income tax returns, mistakes can be costly. The IRS scrutinizes individual and corporate filers’ returns, and it audits and investigates taxpayers suspected of underreporting their federal income tax obligations. With this in mind, you need to be careful when preparing your (or your business’s) returns for the 2020 tax year—and you should consult with a Washington D.C. tax attorney if you have questions or concerns about potential filing issues or liability.
What are the mistakes you need to avoid? Here are five examples of all-too-common tax filing mistakes that can get U.S. taxpayers into trouble:
Mistake #1: Filing Forms that Don’t Match
Filing forms that don’t match is a surefire way to raise questions at the IRS. This includes both filing inconsistent tax forms and filing a Form 1040 that doesn’t match your W-2 or 1099s. If you don’t receive a W-2 or 1099 before Tax Day, you will need to estimate your tax liability, and you will need to file an amendment if you subsequently receive a form that shows you paid less than what you owed.
Mistake #2: Failing to Report Cryptocurrency or Offshore Assets
Cryptocurrency and offshore asset reporting are both enforcement priorities for the IRS. The IRS has indicated that it will be focusing heavily on cryptocurrency investors’ returns in 2021, and taxpayers who own offshore assets can expect to continue to face scrutiny as well.
Mistake #3: Failing to Make Estimated Tax Payments
If you own a small business or work in the gig economy, you are required to make estimated quarterly tax payments to the IRS. If you don’t, you can expect to face interest and penalties after filing your annual return.
Mistake #4: Claiming Fraudulent Deductions
From the home office deduction to the deduction for conservation easements, claiming fraudulent deductions is among the most common triggers for IRS audits and investigations.
Mistake #5: Relying on an Unqualified Tax Preparer
The IRS is warning U.S. taxpayers to be wary of “ghost” preparers who don’t sign their tax returns. Even if you hire someone to prepare your returns for you, you are still directly responsible for the information you submit, and a preparer who does not sign his or her name is almost certainly not qualified to help you make informed tax decisions.
Of course, this list is by no means exhaustive. These are just some examples of issues that the IRS has identified as enforcement priorities over the past year. To minimize your risk of facing an IRS tax fraud audit or investigation, you should rely on the advice of an experienced tax professional, and you should not hesitate to consult with a Washington D.C. tax attorney if you believe that you may be at risk for enforcement action.
Request a Confidential Consultation with Washington D.C. Tax Attorney Kevin E. Thorn, Managing Partner of Thorn Law Group
With decades of experience, Washington D.C. tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, helps individual and corporate taxpayers meet their legal obligations and avoid unnecessary liability in IRS audits and investigations. If you would like to speak with Mr. Thorn, we invite you to call 202-349-4033, email firstname.lastname@example.org or contact us online to arrange a confidential consultation.