The annual ritual of filing taxes may not be the only time when a taxpayer needs to seek the assistance of any tax professional. As per one survey, 43% of taxpayers need to contact the IRS for something that may be different from filing their returns. Whenever a taxpayer does not have any expertise in interpreting the tax code or time to coordinate with the IRS, they need to seek the help of a tax professional when the filing deadline arrives.
Since life changes, tax often changes. The birth of a child, divorce, marriage, a child moving out to support themselves, becoming self-employed, moving out, going back to school and a lot of other life events can generally affect the tax situation of any individual. Whenever a taxpayer does their best in addressing these events when they occur instead of waiting until April, they may avoid any surprises when tax time comes. Tax professionals can provide assistance so they can take advantage of their new tax situation immediately.
The liability of a taxpayer may get affected by new tax benefits, financial transactions as wells as expiring tax benefits. Being able to estimate their taxes prior to the filing date can assist the taxpayer's budget for their tax bill. They may even create estimated tax payments and make changes in their withholding taxes when needed. This may even assist in informing other vital decisions such as the conversion of a retirement account, selling specific stocks, ways to provide charitable donations or when you can spend the funds in your flexible savings account.
A lot of the taxpayers who got enrolled in the Affordable Care Act Marketplace get advance credit payments that provide assistance in paying their insurance premiums. The advance may get calculated on their life situation and projected income upon the enrollment. As their life changes, the actual PTC or Premium Tax Credit may become calculated on the tax return. This can be lower or higher compared to the advance. If the actual PTC is higher, the taxpayer gets the difference and treats it as a refundable credit. If the actual PTC may be lower, taxpayers would have to repay all or some of the excess that would depend on the level of their income. Taxpayers don't need to wait until the year's end to see if they have an unexpected tax bill. The tax professional can even provide assistance to the taxpayer so they will understand when they can inform the Marketplace to diminish the impact of any discrepancy and make adjustments to their advance during the year.
Last 2014, 28.7 million taxpayers were able to file a return that has a balance due. Tax professionals can provide assistance to taxpayers so they can figure out their payment options. One of these may include the application for an installment agreement. In some cases, the taxpayer may become qualified to provide an "offer in compromise" to the IRS that may be smaller than the total amount of tax that is due for payment.
As per the government records, one out of six tax returns doesn't match the information statements that are filed with the IRS. The meaning of this is that the IRS would want to reconcile tax returns that are worth millions with the potential underreporting.
There may be a lot of reasons why there is an under reporter notice and it includes error from the IRS. A lot of under reporter notices got resolved without any changes to the return. Around 17% of individuals may face this issue and it occurs more often in small businesses. Under reporter notices may not always indicate any errors and a professional can provide assistance to get to the bottom of the problem. Tax professionals are also experts in helping to resolve the penalties that may result from any under reporter inquiry.
Whenever there is an audit, the odds are usually in favor of the IRS. Every time a taxpayer gets audited, the IRS could determine if an adjustment is needed in the return. In the fiscal year 2016, there were 1.03 million individual audits. For more than 80% of examined individual returns, the IRS eventually recommended changes to them.
Whenever the IRS completes any audit, individual taxpayers may eventually receive an average recommended bill of more than $6.6 thousand in a mail audit and around $19 thousand for a field audit.
Audits can be very costly if you don't have any supporting documents as well as sufficient knowledge regarding taxpayer rights and the tax code. Aside from these, it may also become very time-consuming. Taxpayers should seek the help of a tax professional whenever they don't have the knowledge or time needed to work with an IRS examiner.
People are obligated to undergo tax compliance for the whole year. However, when it comes to some of the cases, only half of the difficulty involves knowing when you need to look for help.
Advanced Accounting & Tax Planning