Some people may be tempted to try to hide income or under-report their earnings for a particular year. For instance, someone may work a second job that impacts their return on tax day, so they just leave it off their filing and hope the IRS doesn’t notice. This is never a good idea. If an employer has issued you a W-2, 1099, or some other tax document, the IRS will notice that income has not been reported and will ultimately come for the money. It may lower (or eliminate) a tax return to accurately report your income, but as a tax attorney and CPA, it is always best to be honest with the IRS.
If the IRS notices there is a small amount missing from your return, they will send a filer a notice in the mail with the proposed settlement amount. This notice includes the income in question, the amount that was claimed versus the amount that was reported, and the amount that is owed. This settlement offer is generally the amount owed plus interest on the money. The taxpayer then has 30 days to either accept the settlement offer or to appeal. If they don’t respond, penalties and extra interest will be added.
Since this could just be an oversight on the filer’s part, the IRS won’t pursue criminal charges or collection actions if the party responds. There are also no penalties added, just interest on the unpaid amount. Since this amount is generally negligible, the IRS wants to make it as appealing as possible for a person to pay the proposed amount without appealing. If the income is correct and you failed to report, it is best to just bite the bullet and pay the amount. Avoiding it will not make it go away, it will only make things worse. If, however, there is an error, a tax attorney can make sure your appeal is timely filed and ensure that you get the due process you are entitled to.
At Burkhalter & Burkhalter, we can help with your tax filing and make sure you avoid the penalties that come with an audit. We will identify any deductions that may be available to you and do everything possible to minimize your tax obligation. To learn more about how we can help with your taxes, contact us for a free consultation.