Did You Underestimate Your Estimated Taxes?
If you did underestimate your taxes don’t worry, you have plenty of company.
The IRS has estimated that roughly 10 million taxpayers underestimated the amount of taxes they owe between 2007 and 2016.
That’s up from 7 million in 2006.
Why Income Is Overlooked
According to an article in USA Today, one possible reason cited for the increase is the growing gig economy. More and more people are shifting into this area of self-employment. Many are supplementing a regular job and failing to report income from their gigs.
Filing Requirements And Exceptions
The fact is, if you are self-employed and expect to pay $1000 or more in taxes, you’re required to submit quarterly payments that will cover at least 90% of the estimated tax due on your income. The IRS allows certain exceptions to farmers, fishers, casualty and disaster victims, recent retirees, people who are newly disabled, those who base their payments on the prior year’s tax and people whose income flowed in unevenly during the year.
You Received A Penalty Notice
Now, in the end of summer heat, those taxpayers that the IRS feels made mistakes are receiving penalty notices. This is the prime time for IRS to send out notices. According to USAToday.com, “The tax agency hasn’t mounted a special enforcement effort targeting underpayment of estimated taxes.”
It doesn’t seem as if they intend to any time in the near future either. Don’t make the mistake of ignoring this notice. Even though the IRS isn’t making special efforts to come after you, you must respond to the notice.
The Right To Appeal
If you feel you’ve received a penalty notice in error, you have the right to appeal.
One of the guaranteed and most important rights of all taxpayers is the right to appeal. If you disagree with the IRS about the amount of your tax liability or about proposed collection actions you have the right to ask the IRS Appeals Office to review your case.
Typically, underestimating taxes when you owe small amounts can be handled by making quarterly payments. If the IRS says you owe a substantial amount and you disagree, by all means take action to appeal.
At IRSALLSTAR, we believe in getting the absolute best resolution for our clients, our tax professionals file appeals of IRS decisions on a regular basis. If you are curious to find out how successful we are at appeals or to discuss appealing an IRS action or decision, contact us to schedule a free confidential consultation.
If you are in the growing gig economy – and since IRS compliance is absolutely mandatory to achieve any type of tax resolution – preparation and filing of federal and state tax returns is part of what we do on a regular basis.
Contact us for help with your tax problem and once we get the problem solved, let us keep handling your taxes to insure you stay out of trouble in the future. And even if you don’t have a current tax problem, you can protect yourself by having us prepare and file your upcoming tax returns. Contact us now.