Taxes can be a confusing topic, and dealing with the IRS (Internal Revenue Service) can be intimidating for just about everyone. The last thing you want to receive is an IRS matching notice. This notice typically means that something in your tax return doesn't align with the information the IRS has received from its sources.
While this can be a stressful occurrence, it isn’t something you should be too worried about as there are various reasons why you get matching notices from the IRS. This article will show you ways you can avoid an IRS matching notice. Let’s begin!
The basis of a successful tax return is having accurate records. This means keeping all your financial documents, like W-2s, 1099s, and receipts, organised and readily accessible when you file your taxes. Mismatched numbers often trigger IRS notices, so ensure the information on your return matches these documents.
Having calculation errors can lead to IRS matching notices. Before submitting your tax return, take a moment to double-check all your calculations. Basic mistakes like addition or subtraction errors can result in discrepancies that raise red flags.
One of the most common reasons tax payers get IRS notices is not reporting all their sources of income. You should note that the IRS receives copies of your W-2s and 1099s. For this reason, you should account for all of your income sources, including side jobs, freelance work, or rental income. Leaving out any income source can trigger a matching notice.
Your filing status (Single, Married Filing Jointly, Head of Household, etc.) affects your tax liability. Using the wrong status can lead to miscalculations. Ensure to select the one that accurately represents your situation.
While it's tempting to maximise your deductions and credits by claiming everything under the sun, claiming the deductions you aren’t eligible for can raise suspicion. You need to ensure that you qualify for the deductions and credits you claim and provide proper documentation when necessary.
Do not round any numbers in your tax returns simply because they look nice. Rounded numbers in your tax return may look suspicious. Always try to use exact figures, even if they include cents. For instance, entering $4,398 instead of rounding to $5,000.00 can help your return appear more accurate.
File your tax return on time, and if you owe taxes, ensure you pay them promptly. Late filings and payments can lead to penalties and interest, which can catch the IRS's attention.
If your tax situation is complicated, or you aren’t sure about certain credits or deductions, you might want to consider the services of a tax professional. A tax professional can help you ensure your tax return is in compliance and accurate with tax laws.
If for whatever reason, you get an IRS matching notice, the last thing you should do is panic. Take the time to carefully read the notice and follow the instructions provided. In certain instances, the matching notice might be a result of simple misunderstanding. Ensure you respond to the matching notice promptly and provide all the documentation required to resolve the issue.
Keep copies of all your tax-related documents and correspondence with the IRS. This includes copies of your filed returns, W-2s, 1099s, and any letters or notices from the IRS. These records can be invaluable in case of disputes or future questions.
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Jim McClaflin, EA, NTPI Fellow, CTRC