Most people think of jack-o-lanterns, graveyards, or frightful costumes when they think of scary Halloween things. In the tax world, sure, we think all of those are scary, but we also think some very scary tax and IRS situations are worth screaming about, too! So, in the spirit of Halloween (and to follow up on our scary blog last year), we hereby provide you with seven more scary tax situations (rated by 1 to 4 screams) for you to fear this year!
Here’s how they’re ranked: One scream means just keep whistling while you walk right by the graveyard—for instance, you might get a letter from the IRS that you have a bigger refund coming than you expected. Four screams means run right to your CPA! Let’s look at some of the different types of tax situations you could see, and how scary they might be.
- You receive a W-2 or 1099 after your returns have already been filed. You hardly have to scream about this one. We can help you file an amended return including the additional income. Generally, because so little time has elapsed between the due date and the additional W-2, penalties and interest are minimal (if there are any at all), and you may have had taxes withheld on the income already.
- You forgot to make your estimated payments. A self-employed person needs to make quarterly estimated tax payments, otherwise when April 15 comes around, you owe the entire tax bill, and you probably were not saving up for it. Now you have to scramble to get the money together, but it’s better than not paying…
- You didn’t save up for the estimated taxes you forgot to pay, and you decide not to file because you can’t pay what is owed. If you don’t file your tax returns on time, you still owe the money, and you will also end up owing penalties and interest on the tax you owed, as well as an additional penalty for failing to file your return.
- You don’t file returns for a few years because after the first year of not filing, it just got harder and harder to file. Yes, this is not the ideal situation, but we can still help you recover.
- You get a letter from the IRS. Unfortunately, four screams is the first thought that goes through everyone’s mind at the sight of the letter, but it could really be to . You just never know until you open the letter.
- You discovered you unknowingly had a rich uncle in Europe who named you as the beneficiary in his will. This is a good thing, isn’t it? Yes, it is nice to be a beneficiary, but foreign accounts are the root of many tax problems that are usually complex, and the IRS is not in a “treat” mode in these situations. Call us immediately before it turns into .
- You receive a phone call from the IRS demanding immediate payment of a tax bill you never even knew you owed. This feels like , but it is a scam! The IRS will never contact you by phone without previous notifications. And, of course, after you receive the first notification, you would have called us, so we can help you remove all the screams!
Even though we all sometimes feel like screaming when thinking about tax issues, sometimes the situation is very manageable. However, you can’t just turn out the lights and hide in the basement until everyone has gone home. We help clients work through scary tax situations regularly, and we have the experience and knowledge to help you through any of these items. We can help turn that into a .
By Cliff Acheson, CPA