Don’t Let Red Flags Bring IRS Attention

The IRS is back to work in time for tax season.

The IRS is getting back to work just in time for tax season. And it’s already a bit of a rough road. But don’t let difficulties lull you into setting off alarms with your tax returns.

With tax season under way, some taxpayers are complaining about long waits when they call the IRS with questions. According to MarketWatch:

The long waits are most likely an after-effect of the 35-day government shutdown. The partial shutdown crippled the IRS, cutting its staff in half during that time and forcing employees to abandon fundamental tasks like answering hotline calls and auditing returns.

But even taking staffing into account, there are a few red flags that could land you in trouble with the IRS. Here are a few things to be aware of.

Report all income

Almost nothing will land you in hot water faster than unreported income. “All those forms you receive showing income — i.e., your W-2 from work, a 1099-MISC or 1099-K reporting side income or 1099-INT showing taxable interest of $10 or more on a bank account — also go to the IRS. And if you fail to report any of those earnings, you’ll hear from the IRS — the discrepancy will generate an automatic letter,” according to CNBC.

Another thing to remember is that the IRS is on the lookout for those who fail to report gains and losses from investments in bitcoin and other cryptocurrencies. So if you’ve dabbled in cryptocurrency investments, be sure to make that clear.

Charitable contributions

With changes to the tax code, some couples may have decided to bundle their charitable contributions. That could be an appropriate strategy.

But, according to CNBC, “the IRS knows how much taxpayers at various income levels typically donate. So if your charitable-contribution deduction is high relative to your income or in comparison to your income peers, it could trigger interest from the agency.”

So be sure you have documentation to back up your charitable giving claims.

Leave a Reply

Your email address will not be published. Required fields are marked *