As the year comes to an end, you may already be thinking about your tax situation for 2018. Understanding the tax code often feels like trying to decipher a foreign language. You always do your best to stay within the code as you prepare your taxes, but you may never be 100 percent sure that you did everything right.
The majority of the time, you probably didn't break any rules, but it often only takes one time for the IRS to question you. If the agency thinks you committed fraud, you could end up in hot water.
These mistakes could put you under suspicion
Even seemingly innocent mistakes could result in harsh penalties. Below are some of the most common errors people make:
- If you itemize, you may attempt to claim deductions that you shouldn't, or you may claim the wrong deductions. Depending on the circumstance, you could face fines up to $250,000 and/or no more than three years in prison.
- If you itemize, you may be tempted to stretch the truth when it comes to the amount of your deductions. You could face penalties of up to 20 percent of the amount the IRS disallowed, a fine up to $5,000 or a penalty of up to 75 percent of the amount of taxes you owe.
- Perhaps you failed to include certain information or the information you provided was wrong. You may receive the chance to correct the issue, but you could also face fines up to $100,000 and/or up to a year in jail.
- If the IRS discovers that you failed to report all of your income, you could face penalties as well. If you fail to report tips, you could face one set of penalties, but regardless of where your income comes from, you may face fines up to $250,000 and/or up to five years in prison.
Other errors could also land you in hot water with the IRS. The best way to avoid these and other mistakes is to make sure that you receive the right information before filling out your income tax returns. However, if you failed to take this precaution, or even if you did and your tax preparer swindled you, you could need more than just a good tax attorney. You may also need a criminal defense attorney since some mistakes could lead to criminal charges.