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How Individuals Often Find Themselves in IRS Trouble: 5 Common Pitfalls

Updated: May 2

Liberty Financial Solutions, LLC: We worry about the IRS so you don't have to...


How individuals often find themselves in IRS trouble:


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IRS Trouble

How Individuals Often Find Themselves in IRS Trouble


As we've discussed before, paying taxes is a civic responsibility that every working American is subjected to. However, millions of Americans find themselves in hot water with the IRS. Some intentional and others are inadvertent, but understanding the common ways people get into tax troubles can help in avoiding these pitfalls.

 

Here are 5 common ways taxpayers run into IRS trouble. If you find yourself owing $10,000 or more to the IRS or state, reach out to our tax resolution firm for a free consultation at 817.995.5008 or email us at info@libertytaxdefenders.com.


1.) Failing to File Returns


Perhaps the most direct way to invite IRS scrutiny is simply not filing a tax return. Some people, especially those anticipating a tax bill, might decide to avoid filing. This can result in failure-to-file penalties, which can add up quickly. The IRS will not let this go unnoticed.  It’s also important to note that you can go to prison for a year and be fined $10,000 for each legally required tax return that isn’t filed.


2.) Incorrectly Reporting Income


Intentional or unintentional underreporting of income is a red flag. Discrepancies between the income reported to the IRS by employers (via W-2s or 1099s) and what's declared on individual or business returns can trigger audits.


3.) Claiming Excessive Deductions


While tax deductions can significantly reduce tax liability, overstepping by claiming excessive or unwarranted deductions can be problematic. This includes inflating charitable donations or exaggerating business expenses. PRO TIP: Only take deductions for expenditures that you have documentation for.



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4.) Ignoring IRS Notices


The IRS often sends notices for minor discrepancies or requests for additional documentation. Ignoring these can escalate the issue, leading to more severe consequences. If you're getting IRS notices, make sure you get help. Call us at 817.995.5008 or email us at info@libertytaxdefenders.com.


5.) Engaging in Tax Evasion Schemes


Illegal schemes, such as hiding money in offshore accounts or engaging in identity theft and fraudulent returns, are serious offenses that can lead to criminal charges. It’s not a crime for taxpayers to use the tax code to legally find ways to pay less taxes. However, some people get a little too creative or they get the wrong advice. Consult with a tax professional before engaging in schemes to lower your taxes.


What happens if you land in tax trouble?


IRS problems, once initiated, can escalate quickly, leading to hefty fines, penalties, or even legal actions. Being aware of these common pitfalls and ensuring compliance can help individuals maintain a clear record and avoid unnecessary complications with tax authorities. When in doubt, it's always advisable to seek advice from tax professionals or experts in the field.

 

If you're facing IRS problems and owe $10,000 or more in back taxes or are being audited, reach out to our tax resolution company at 817.995.5008. We'll schedule a free and confidential consultation to explain your options thoroughly and help you permanently resolve your tax problem https://www.libertytaxdefenders.com/.


Cheers!




P.S. Make sure you get your FREE copy of our SPECIAL REPORT: "The 7 Secrets The IRS Does NOT Want You To Know!" (simply click on the link in the previous sentence, scroll down to the second section of our home page, and download your copy today!)


Or, email us at:  info@libertytaxdefenders.com for your FREE COPY!



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