7 Mistakes That Could Lead to Problems with the IRS in 2021Articles/News, Offshore Account Update
Posted on February 26, 2021 | Share
While the federal government extended Tax Day to July 15 last year in response to the COVID-19 pandemic, there is currently no indication that a similar extension is under consideration for 2021. This means that U.S. taxpayers need to be prepared to file their returns and pay what they owe no later than April 15. When filing your returns, there are several mistakes you need to avoid—as failure to avoid them can potentially lead to an Internal Revenue Service (IRS) audit or investigation.
What Not To Do During the 2021 Tax Season
Here is an overview of seven common tax mistakes that can lead to IRS scrutiny from Boston tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group:
1. Filing Inconsistent Tax Forms
When filing your taxes, you need to make sure that the information you submit is consistent across all of the forms that you file. This is true whether you handle your taxes yourself or hire a tax preparer.
2. Omitting Income Source Documentation
When filing your returns as an individual taxpayer, you must include your W-2s, 1099s, and/or other income source documentation. If you do not have this documentation, you must request it from the appropriate party; and, if you cannot obtain it, then you must estimate your income and file an additional IRS form.
3. Failing to Report Cryptocurrency Income
Cryptocurrency is currently a hot-button issue at the IRS. Cryptocurrency investors must accurately report their gains and losses on all transactions, and they must accurately calculate and pay what they owe.
4. Failing to Disclose Offshore Accounts
U.S. taxpayers who own offshore accounts must disclose their accounts on an annual basis, with only limited exceptions. Failure to do so can lead to steep penalties, which can potentially be mitigated through voluntary disclosure.
5. Falsely Reporting Gambling Income or Losses
If you bet on sports, gamble at Massachusetts’ casinos or gamble through any other means, you have an obligation to report your wagering income and losses to the IRS. This is another “emphasis area” for the IRS in 2021.
6. Improperly Claiming Deductions
Itemizing deductions can be a highly effective way to minimize your tax liability, but it can also increase your risk of facing IRS scrutiny. The IRS is paying particular attention to taxpayers who claim a home office, conservation easement, charitable and business deductions in 2021.
7. Ignoring the Omission of Quarterly Returns
If you are a small business owner or independent contractor, or if you worked in the gig economy during the COVID-19 pandemic, you had an obligation to file quarterly estimated returns in 2020. If you failed to do so, you will need to address this proactively so that you do not face unnecessary penalties when you file your annual return.
Contact Boston Tax Attorney Kevin E. Thorn, Managing Partner of Thorn Law Group
Are you concerned that you may be behind on your federal tax reporting or payment obligations? Could you be at risk for substantial liability in an IRS audit or investigation? To discuss your situation with Boston tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, in confidence, call 617-692-2989, email firstname.lastname@example.org or contact us online today.