3 Things That Can Get You Into Trouble With The IRS
Posted on: 24 November 2014
If there is one thing that every U.S. citizen can depend on, it is the fact that the IRS will see to it that they get a portion of your annual income. You can try to hide money or attempt to use different deductions to decrease your tax liability, but doing so can cause problems. Here are three things that can get you into trouble with the IRS.
1. Failing to list supplemental income.
Most people know that they have to list any income source that they have a W-2 form for. However, many don't realize that they also are required to list any supplemental income that doesn't get reported on a W-2 form. If you receive any money in exchange for independent contractor work, the rental of property, prizes, awards, etc., you have to fill out a 1099-MISC form with your income taxes. Any extra income of $600 or more should be reported on this form, whether you have any tax forms for the payments or not.
If you do not report this extra income on your taxes and it is discovered by the IRS, you will not only have to pay the extra taxes owed on the income, but you will also have to pay additional fees and face the possibility of jail time. In the end, it is far better to report the supplemental income in the beginning than it is to try to hide it.
2. Claiming dependents that aren't yours to claim.
While it is easy to determine if you can claim your minor child as a dependent for income tax purposes, things get less clear when the child is an adult still living at home or you want to claim a disabled relative you are caring for. Before you can claim your child or disabled relative as a dependent for tax purposes, you must make sure of several things:
- No one else has claimed them as a dependent (this can be a problem you run into if you are divorced)
- The dependent is not married and is therefore not filing a joint tax return with their spouse
- The dependent must be a citizen or legal resident of the United States
- The dependent meets the eligibility requirements to be a qualifying child or relative for tax purposes
If you claim a dependent on your tax form that has been claimed by another person, you will have your taxes audited. It doesn't necessarily mean you did something wrong, but the IRS will send someone to go over your taxes and determine whether or not you were allowed to claim the dependent on your income taxes.
3. Failing to contact the IRS if you need help paying your taxes.
The IRS gets a bad reputation for wanting its money immediately. However, the IRS is there to help you if you have a problem. If you find that you owe the IRS more money than you can feasibly pay in one payment, you can contact them to set up a payment plan. You will have to fill out paperwork and have it filed. They do charge a fee for the installment plan, but it is better than getting in a legal mess with the IRS and facing thousands of dollars in fees and time in jail for tax evasion. Contact a tax attorney for more information.Share