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Tips to Help You Avoid IRS Penalties

Friday, November 9, 2012

Anytime you do not have an accurate, timely tax return filed, you are subject to IRS penalties.  They can access and place penalties on you for a variety of infractions.  This can amount up to a large portion of your tax bill, but there are ways you can avoid this problem.  Here are a few tips to keep you from getting that notice of penalties included on your tax bill.

Don’t File Late

Many people are aware that they will receive a penalty if they miss the April 15th filing deadline.  However, they do not realize that it can amount up to a fourth of their tax liability.  For someone that owes $5000 in taxes, they can add another $1250 if they miss their deadline.  To prevent this, file on time or request an extension before the deadline.

Did you also know that you will get penalized with a late filing fee if you forget to sign your tax return?  Not signing the return is the same as not filing according to the IRS.  So, take a few extra minutes to look over your return before you send it.

Maintain Mileage Records

If you plan to include mileage on your car as part of your itemized deductions, you will want to make sure everything is accurate and detailed records are maintained.  If the IRS is concerned about your claims, they can request to see your mileage records that detail every mile you are deducting.  If anything does not add up, you can be subject to a penalty of 25 percent.

Double Check Your Math

When you file by hand, you are more likely to have errors on your return than when you file electronically.  It can be simple addition errors or forgetting to include something in the right box.  But those errors can cost you if they result in an underpayment of your taxes.  You may end up paying interest on the extra that you owed.

Get Receipts for Your Donations

If you include a charitable donation in your deductions, you need to have a receipt that lists the details of the noncash donation.  For example, if you donate furniture, you need to have the organization give you a receipt that lists each item individually along with its condition and value.  Without this information, in the event of an audit, you could have the donation rejected and pay a penalty up to 25 percent plus interest on the amount you owe as a result.  This can turn out to be a very expensive donation.

The best way to prevent these mistakes is by working with the tax experts at Strategic Tax Lawyers.  They are experienced at filing tax returns and helping clients get reduced IRS penalties if the error was an accident.  If you don’t want to worry about how accurate and correct your tax return is, let the professionals handle it for you.  Any questions the IRS has about the return will then go to the tax attorney instead of you.

IRS Help

Contact the IRS with specific questions about your tax returns.  Or, visit their website, IRS.gov, to download and search the correct IRS forms and publications.   The Department of Labor is a good resource on employment law; and you can always head to Google for some quick answers to your questions.  The Beverly Hills Bar Association offers helpful information.