If you have ever made an error on a tax return, you know first-hand how interested the IRS will become in ensuring that you rectify the situation. Sometimes, however, the shoe is on the other foot. When the IRS does make the occasional mistake with a taxpayer, it can turn into a headache that doesn’t resolve in a timely manner. To help you understand your obligations and rights as a taxpayer, we have outlined a few ways in which the IRS has been known to make mistakes.
1. Auditing taxpayers who don’t appear to need to report capital gains from selling their house. Any time you receive a profit from a sale or transaction, that profit is referred to as capital gains. People are generally required to pay taxes on capital gains, but a law passed in 1997 allows individuals to avoid taxes on real estate profits of up to $250,000. Married couples enjoy up to $500,000 of tax-free capital gains.
Many reputable publications inform readers that taxpayers are not obligated to report these excluded gains, but the IRS has been auditing some individuals for not reporting this information. We have helped a number of clients who have sold their principal residence respond to these IRS audits and show they qualified for this exclusion of gain and owed no tax.
2. Other times, the IRS simply assesses an incorrect amount of tax on home sellers. A quality tax law attorney will be able to determine whether or not you correctly reported capital gains if you are involved in a dispute with the IRS.
3. Claiming you had unreported income when you didn’t. One of the main goals of the IRS in enforcement is ensuring that U.S. residents do not hide taxable income or assets from the government. However, through tax avoidance (a completely legal practice), you might be able to avoid taxes on certain assets, like gifts. Sometimes, though, the IRS will mistakenly claim that you did not put items, like unreported income, on your tax return. Having an attorney by your side is crucial to help clear up such disputes in an efficient manner.
What Should You Do if the IRS Makes a Mistake?
Try not to panic; instead, take swift action. Be sure to have all relevant documents on hand to present as evidence that the IRS did indeed make a mistake. Get in touch with the appropriate IRS office and give the representative as much information as possible. If the IRS does not admit its mistake, then it is time to call an attorney. Attorney Robert V. Boeshaar is well-equipped to help you resolve any disputes you have with the IRS. Call our firm at 206-899-0869 today to schedule a consultation and discuss your options.
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