Believe it or not, underreported income happens a lot more than you may think.
It can happen for a number of reasons: Forgetting an income stream, misplacing an employee W-2, or even tax evasion.
Whatever led to your specific case of underreported income, you’re probably wondering what comes next. Will the IRS even know? Are they going to come knocking at your door? How do you even fix your situation?
We’re not going to waste any time getting you the information you need. With the right information, the right tax assistance, and quick action, you can get squared away with your tax obligation and get back on the IRS’s good side.
So, let’s get started.
Underreporting your income is serious business, so if you discover you’ve underpaid your taxes or forgotten to file properly, you should start working to make it right—right away. If you don’t, there are potentially serious consequences.
Regardless of why you underreported your income, you’re still on the hook for payment. However, depending on how much and how late your payments are, you may be accruing late penalties and fees. Penalties will slowly but surely stack up, and that can put you on the hook for more money than you might expect.
We need to reiterate: You owe the IRS your taxes, regardless of whether your underreported income is a simple error or tax evasion. When you underreport your taxes, you leave yourself vulnerable to a big, unexpected tax bill.
Let’s say you’re working a gig lifestyle, driving for Lyft, completing odd jobs on TaskRabbit, and performing some freelance marketing services on the side. If you forget to file—and pay—taxes on $3,000 of income from TaskRabbit, the resulting tax bill may put you in a serious financial bind.
In most cases, the IRS is pretty speedy in finding out you’ve underreported on your taxes. While you may not have reported properly, the IRS still receives 1099 and W2 income information from your employer. Or, if you own a small business, the IRS will likely receive information from your clients or vendors.
Audits are often automatically triggered, especially when there are strange gaps in your income reporting. Remember, the IRS has all the income information that’s out there—and every missing piece on your end is that much more likely to stand out.
Very few taxpayers go to jail for tax evasion, but it’s always a possibility. However, for the simple mistakes that lead to most underreported income, it’s extremely unlikely to happen. If you’ve been evading your taxes, it’s important you come clean and get back on the right path immediately.
If you’ve underreported your income, you’re not alone. It happens all the time! The best way to avoid major consequences is by squaring up with the IRS. Here’s how to get level with the IRS—in four steps.
Most taxpayers simply don’t have much of a tax background outside of their annual filing. When dealing with your underreported income, enlist some assistance. An experienced tax professional will not only help guide you through the process and find you savings, but they’ll be able to answer any questions you may have along the way.
One of the first things a full-service tax representation firm will do is file all back returns and any amendments to your taxes—which will give you a sense of what you actually owe the IRS and potentially result in a lower total than you expect. In many instances of underreported income, the solution is as simple as filing an amendment to your most recent tax return. In these minor cases, you may not even need to hire a tax professional!
Depending on the size of the tax bill that resulted from your underreported income, the final step to getting squared away with the IRS is to pay up. Depending on your financial situation and the size of the bill, you may be able to write a check for the full total and put the whole ordeal behind you! If your resulting tax bill is in the thousands or more, a good tax services firm will help you work out a payment plan with the IRS. You won’t be out of the woods yet, but you’ll be on the right path.
We meet a lot of people who have let underreported income spiral into intimidating tax debt, but it doesn’t have to come to that. If you realize you’ve underreported your income, it’s okay—but now’s the time to take action. Everything will be okay.
You never have to deal with life’s scariest tax situations alone. Call StopIRSDebt.com today and let us guide the way.
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