Joe Lentini

When married couples file joint tax returns, both individuals are jointly and severally liable for any tax liabilities, including additional taxes, interest, and penalties. This means that the IRS can pursue either spouse for the full amount owed, regardless of who earned the income or caused the tax issue. However, the IRS provides a provision known as Innocent Spouse Relief, which can relieve a spouse from being held responsible for tax liabilities resulting from errors or omissions made by the other spouse on a jointly filed return.

Understanding Innocent Spouse Relief

Innocent Spouse Relief is designed to protect individuals who were unaware of errors or omissions made by their spouse on a joint tax return. This relief can absolve the innocent spouse from additional tax, interest, and penalties that arise due to the other spouse’s actions. The IRS recognizes that in certain situations, it would be unfair to hold both spouses liable for the tax debt.

Types of Relief Available

The IRS provides several avenues of relief for individuals seeking protection from joint tax liabilities. These relief types—Innocent Spouse Relief, Separation of Liability Relief, and Equitable Relief—are tailored to meet different circumstances faced by taxpayers. Understanding each type of relief is crucial for determining which option best suits your situation.

1. Innocent Spouse Relief

Definition and Purpose
Innocent Spouse Relief is the most well-known form of tax relief provided by the IRS. It applies when there is an understatement of tax on a joint return due to erroneous items (e.g., unreported income, inflated deductions, or fraudulent claims) caused by one spouse. Innocent Spouse Relief absolves the requesting spouse of liability if they had no knowledge or reason to suspect the error at the time the return was filed.

Key Scenarios
This type of relief is particularly relevant in cases where one spouse controlled the finances or filed the taxes without the other spouse’s full awareness. For example:

• Unreported Income: A spouse may fail to disclose significant income, such as earnings from freelance work or side businesses.
• False Deductions: One spouse might claim deductions for expenses that were not incurred, such as fake charitable contributions.
• Tax Fraud: In extreme cases, a spouse might deliberately manipulate figures to lower the tax liability.

Eligibility Requirements
To qualify for Innocent Spouse Relief, you must meet these criteria:

• A joint return was filed for the tax year in question.
• There is an understatement of tax due to errors made solely by your spouse.
• At the time of signing, you did not know and had no reason to know about the understatement.
• Holding you responsible for the taxes would be unfair under the circumstances.

Limitations
Innocent Spouse Relief only applies to understated taxes (those that should have been reported but were not). It does not cover underpayment of taxes that were correctly reported on the return but not paid.

2. Separation of Liability Relief

Definition and Purpose
Separation of Liability Relief allows the IRS to allocate the tax liability between spouses or former spouses. This type of relief applies when the requesting spouse is no longer married to, legally separated from, or has been living apart from the other spouse for at least 12 months.

Key Scenarios
This relief is particularly useful for individuals who were unaware of financial decisions made by their spouse during the marriage. For example:

• Post-Divorce Tax Issues: After a divorce, one spouse may discover that their former partner failed to report income or claimed improper deductions during their marriage.
• Separation Agreements: In some cases, a legal separation agreement may address how taxes will be handled, but the IRS allows further adjustments through this relief.

Allocation Process
When you request Separation of Liability Relief, the IRS will examine the erroneous items and determine which portion of the liability belongs to you versus your spouse. Factors considered include:

• Control of Finances: Who managed the income and expenditures that led to the error.
• Knowledge of Errors: Whether you were aware or should have been aware of the tax issues.
• State of Relationship: Whether you were still living together at the time of filing.

Eligibility Requirements
You may qualify for this relief if:

• You are no longer married, are legally separated, or have not lived with your spouse for at least 12 months.
• You did not have actual knowledge of the erroneous items when you signed the return.

Limitations
Separation of Liability Relief only applies to understated taxes. It does not relieve responsibility for underpaid taxes reported correctly on the return.

3. Equitable Relief

Definition and Purpose
Equitable Relief is a broader form of relief that applies when neither Innocent Spouse Relief nor Separation of Liability Relief is available. This relief can address both understated and underpaid taxes. The IRS uses a holistic approach, examining all facts and circumstances to determine if holding the requesting spouse liable would be unfair.

Key Scenarios
Equitable Relief is often granted in situations involving abuse, financial control, or other extenuating circumstances, such as:

• Spousal Abuse: A spouse may have been coerced into signing a tax return under duress or threats.
• Limited Financial Knowledge: A spouse may have relied entirely on their partner to handle finances, resulting in unawareness of the tax liability.
• Misrepresentation: A spouse might discover years later that their partner intentionally concealed financial details.

Eligibility Requirements
The IRS considers several factors to determine eligibility for Equitable Relief, including:

1. Marital Status: Whether you are divorced, separated, or still married.
2. Economic Hardship: Whether paying the tax liability would cause undue financial strain.
3. Abuse or Control: Whether there was abuse or financial domination by your spouse.
4. Significant Benefit: Whether you significantly benefited from the unpaid or understated tax liability.

Application Process
Unlike other forms of relief, Equitable Relief has no strict timelines, but applying as soon as possible is encouraged. Taxpayers must file Form 8857 and provide detailed explanations and supporting documentation, such as:

• Court documents (e.g., divorce decrees or restraining orders).
• Correspondence showing financial control or abuse.
• Evidence of hardship, such as bills or proof of income.

Examples of Relief in Action

1. Case Study: Innocent Spouse Relief
   Jane signed a joint tax return believing her husband, John, had accurately reported their income. Later, the IRS uncovered unreported income from John’s side business. Jane had no involvement or knowledge of this income. She successfully claimed Innocent Spouse Relief, as she met all criteria.
2. Case Study: Separation of Liability Relief
   Sarah and Mike divorced in 2021. The IRS later determined that their 2019 joint return contained erroneous deductions claimed by Mike. Since Sarah had no knowledge of the issue and was now divorced, she applied for Separation of Liability Relief and was held responsible only for her portion of the tax.
3. Case Study: Equitable Relief
   Lisa’s husband, Tom, manipulated their finances and concealed unpaid taxes. After a divorce, Lisa faced mounting tax liabilities she couldn’t afford. The IRS granted Lisa Equitable Relief due to the financial and emotional control Tom exercised during their marriage.

Eligibility Criteria for Innocent Spouse Relief

To qualify for Innocent Spouse Relief, the following conditions must be met:

• Joint Return: A joint return was filed for the tax year in question.
• Erroneous Items: The understatement of tax is due to erroneous items of the other spouse.
• Lack of Knowledge: At the time of signing the return, the requesting spouse did not know and had no reason to know that there was an understatement of tax.
• Inequity: Considering all facts and circumstances, it would be unfair to hold the requesting spouse liable for the understatement of tax.

Steps to Claim Innocent Spouse Relief

Claiming Innocent Spouse Relief can be a complex and sensitive process, but with careful preparation and an understanding of the required steps, you can navigate it effectively. Here’s a comprehensive guide to the process, ensuring every detail is addressed to maximize your chances of success.

Step 1: Understand Your Eligibility

Before initiating your claim, ensure that you meet the criteria for Innocent Spouse Relief. The IRS requires you to fulfill specific conditions:

• You filed a joint return for the tax year in question.
• The understatement of tax resulted from erroneous items attributable to your spouse.
• At the time of signing the return, you did not know and had no reason to know about the understatement.
• Holding you liable would be inequitable based on the circumstances.

If you’re unsure whether you qualify, consider consulting a tax professional to assess your situation. This step is vital because applying without meeting the requirements can result in rejection and unnecessary delays.

Step 2: Gather Necessary Documentation

The success of your claim heavily depends on the documentation you provide. Gather and organize the following materials:

1. Tax Returns: Copies of the joint tax return(s) for the year(s) in question.
2. Financial Records: Bank statements, W-2s, 1099s, and other financial documents showing your income and expenses.
3. Proof of Separation (if applicable): Divorce decrees, legal separation agreements, or proof of separate residences.

4. Communication Records: Emails, letters, or text messages that demonstrate your lack of knowledge about the tax errors.
5. Supporting Evidence of Fairness: Any documents that prove inequity, such as medical bills, evidence of abuse, or financial hardship records.

Having well-organized documentation makes your claim more compelling and minimizes back-and-forth communication with the IRS.

Step 3: Complete IRS Form 8857

Form 8857, Request for Innocent Spouse Relief, is the official document used to apply for this relief. Fill out this form carefully and completely, as errors or omissions can delay the process. Here’s a breakdown of the key sections:

1. Basic Information: Include your name, address, and Social Security Number (SSN).
2. Tax Return Details: Specify the tax years for which you are requesting relief.
3. Marital Status: Indicate your current marital status (married, divorced, separated, etc.).
4. Explanation of Circumstances: Provide a detailed explanation of why you qualify for Innocent Spouse Relief. Be honest and thorough.
5. Erroneous Items: Identify and explain the specific errors made by your spouse, such as unreported income or false deductions.

Pro Tip: Use the additional pages section to include as much detail as necessary, ensuring clarity and comprehensiveness.

Step 4: Submit Your Claim

Once Form 8857 is complete, submit it to the IRS. The mailing address varies depending on your location and whether you’re including additional forms or payments. Always check the latest IRS instructions for the correct address.

Alternatively, you can fax the form to the IRS. Retain a copy of the fax confirmation for your records. Regardless of the submission method, always keep a copy of Form 8857 and all supporting documents.

Step 5: Respond to IRS Correspondence

After receiving your claim, the IRS will begin its review. During this phase:

1. Expect Correspondence: The IRS may send letters requesting additional information or clarification. Respond promptly to avoid delays.
2. Notify Your Spouse: The IRS is legally obligated to inform your spouse or former spouse about your request. This can be a sensitive matter, so prepare for possible communication or responses from them.
3. Provide Further Evidence: If the IRS requests additional documentation, ensure it’s accurate and comprehensive.

Important: The IRS will not share your current address or contact information with your spouse, ensuring your privacy.

Step 6: Participate in the Review Process

The IRS will thoroughly evaluate your claim by considering all submitted information. Here’s what happens during the review:

1. Initial Assessment: The IRS reviews the completeness of your form and accompanying documents.
2. Spouse’s Input: Your spouse or former spouse may provide their perspective on the claim, which the IRS considers.
3. Equitable Considerations: The IRS examines whether it’s fair to hold you accountable for the tax liability, factoring in abuse, financial control, or other hardships.

Step 7: Receive the IRS Determination

Once the review is complete, the IRS will issue a preliminary determination letter. This letter outlines their decision regarding your request:

• Approval: If your request is approved, the letter will specify the relief granted and the associated tax liabilities absolved.
• Denial: If denied, the letter will include reasons and information about your right to appeal.

Step 8: Appeal a Denial (if applicable)

If the IRS denies your request, you can appeal the decision. Here’s how:

1. File a Protest: Submit a written protest to the IRS Appeals Office explaining why you disagree with their determination.
2. Request a Hearing: Attend an Appeals Office hearing to present your case and additional evidence.
3. Tax Court: As a last resort, you can take your case to the U.S. Tax Court for further review.

Engage a tax attorney or professional to navigate this stage effectively, as it can be legally complex.

Step 9: Monitor Deadlines

Throughout the process, strict deadlines apply:

• Initial Filing: Submit Form 8857 within two years of the IRS’s first collection attempt.
• Appeals: File protests and appeals promptly, adhering to IRS timelines.

Missing deadlines can jeopardize your claim, so keep track of all due dates and respond in a timely manner.

Step 10: Maintain Documentation and Follow Up

Even after a favorable decision, keep all correspondence, forms, and evidence. The IRS may revisit your case in certain circumstances, and having detailed records ensures you’re prepared.

Additional Tips for a Successful Claim

1. Seek Professional Guidance: A tax professional or attorney can provide invaluable assistance, especially for complex cases involving abuse, fraud, or significant financial control.
2. Be Honest and Transparent: Any discrepancies in your story or documentation can harm your credibility. Always provide truthful information.
3. Communicate Effectively: Prompt responses to IRS inquiries demonstrate cooperation and commitment to resolving the issue.
4. Understand the Process: Familiarize yourself with IRS publications and updates related to Innocent Spouse Relief to stay informed.

Time Frame for Filing

Generally, you must file Form 8857 no later than two years after the date on which the IRS first attempted to collect the tax from you. However, different deadlines may apply for equitable relief and other specific situations.

Innocent Spouse Relief provides a vital safeguard for individuals who find themselves unfairly burdened by tax liabilities due to their spouse’s actions. By understanding the types of relief available, eligibility criteria, and the steps to apply, you can navigate the process more effectively and seek the relief you deserve.

Resolve Your IRS Tax Problems with Expert Help

Struggling with IRS tax problems, including back taxes, penalties, or interest? Let J&J Tax Resolutions Group LLC help. Our experienced team can end wage garnishments, release tax liens, and guide you through tax relief options tailored to your situation.

Don’t wait—call 516-821-8193 now or request a consultation on our website!

Navigating the complexities of the U.S. tax system can be daunting, and missteps in dealing with the Internal Revenue Service (IRS) can lead to significant financial and legal consequences. Understanding common pitfalls and how to avoid them is crucial for maintaining compliance and minimizing stress.

1. Filing Late or Not at All

Failing to file your tax return on time or neglecting to file altogether is a prevalent mistake that can result in substantial penalties. The IRS imposes a failure-to-file penalty, which accrues monthly and can reach up to 25% of the unpaid taxes. Even if you cannot pay the full amount owed, it’s essential to file on time to mitigate these penalties.

How to Avoid: Keep track of tax deadlines by marking them on your calendar and setting up reminders to ensure timely submission. If you need more time to prepare your return, file Form 4868 to request an extension. However, remember that an extension gives you more time to file, not to pay your taxes, so ensure you pay at least a portion of the expected amount. If the process feels overwhelming, seeking professional assistance can help you file accurately and on time.

2. Underpayment of Estimated Taxes

Self-employed individuals, investors, and those with significant non-wage income are required to make estimated tax payments quarterly. Underpaying these taxes can lead to penalties and interest charges, adding unnecessary costs.

How to Avoid: To prevent underpayment, accurately estimate your tax liability based on your current income and applicable tax rates. The IRS’s safe harbor rule allows you to avoid penalties if you pay at least 90% of your current year’s tax liability or 100% of the previous year’s liability. Adjusting your withholding through your employer can also help cover additional tax liabilities if you have wage income.

3. Mathematical Errors

Simple arithmetic mistakes can lead to incorrect tax calculations, resulting in either overpayment or underpayment. While the IRS often corrects these errors, they can delay the processing of your return and any refunds.

How to Avoid: Utilize reliable tax software or e-filing platforms, which perform calculations automatically and reduce the risk of mathematical errors. Always double-check your entries to ensure accuracy, and if you have complex tax situations, consulting a professional can further ensure your return is error-free.

4. Incorrect or Missing Information

Errors such as incorrect Social Security numbers, misspelled names, or missing signatures can result in processing delays or even rejections of your tax return.

How to Avoid: Verify all personal information, including Social Security numbers and names, against official records before submitting your return. Ensure that every required field is completed, and don’t forget to sign and date your return. For electronic filing, use the correct PIN to authenticate your submission.

5. Choosing the Wrong Filing Status

Your filing status determines your tax rates and eligibility for credits and deductions. Selecting the wrong one can result in overpaying or underpaying taxes, or even missing out on valuable benefits.

How to Avoid: Take time to understand the five available filing statuses—Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Widow(er)—and assess which applies to your situation. Consider factors like marital status and whether you have dependents. If you’re unsure, consult IRS resources or a tax professional for guidance.

6. Overlooking Taxable Income

All income, whether from wages, interest, dividends, or self-employment, must be reported. Failing to include all sources of income can result in underpayment and subsequent penalties.

How to Avoid: Collect all income-related documents, such as W-2s and 1099s, before filing your return. Report every source of income, including freelance work, side jobs, and investment earnings. Keeping organized records throughout the year ensures you have everything needed when filing.

7. Misreporting Deductions and Credits

Claiming deductions or credits you’re not eligible for—or failing to claim ones you are entitled to—can lead to audits or the loss of tax benefits.

How to Avoid: Research the qualifications for any deductions or credits you plan to claim to ensure you meet the criteria. Keep receipts and other documentation to support your claims in case of an audit. If you’re unsure about eligibility, IRS publications or a tax professional can provide clarity.

8. Ignoring IRS Notices

Ignoring correspondence from the IRS can exacerbate tax issues, leading to additional penalties, interest, or even legal action.

How to Avoid: Always open and review mail from the IRS promptly, as it often contains important information about your tax account or action items. Respond to notices within the deadlines provided to avoid escalating the situation. If the matter is complex or unclear, seek professional assistance for guidance on how to proceed.

9. Poor Record-Keeping

Inadequate record-keeping makes it challenging to substantiate income, deductions, or credits if the IRS requests proof during an audit.

How to Avoid: Organize your financial documents systematically, including receipts, invoices, and statements. Use financial software or apps to track income and expenses throughout the year. Keep records for at least three years, or longer if your situation involves specific circumstances, such as claiming significant deductions.

10. Handling Audits Unprepared

Being audited without adequate preparation or understanding of the process can lead to unfavorable outcomes, including increased tax liabilities.

How to Avoid: Respond to audit notices promptly and courteously, gathering all relevant documentation to support your tax return. Stay calm and cooperative throughout the process. Hiring a tax professional to represent you can provide peace of mind and ensure your case is handled effectively.

11. Failing to Pay Taxes Owed

Some taxpayers mistakenly believe that not paying taxes owed will result in leniency or that the IRS won’t notice. In reality, unpaid taxes lead to accumulating interest and penalties, making the debt grow over time. Additionally, ignoring this obligation can result in wage garnishments, liens, or levies.

How to Avoid: If you can’t pay the full amount owed, pay as much as possible to reduce interest and penalties. Consider setting up an installment agreement with the IRS to pay off the remaining balance over time. If you’re experiencing significant financial hardship, explore the possibility of an Offer in Compromise (OIC) to settle your debt for less than the full amount owed.

12. Not Keeping Up with Changing Tax Laws

Tax laws are subject to frequent changes, including new credits, deductions, and regulations. Ignorance of these updates can lead to missed opportunities for savings or noncompliance with current rules.

How to Avoid: Stay informed about tax law changes by reviewing IRS updates or consulting with a tax professional annually. Many accounting firms offer resources and guidance on navigating new tax policies. If you prepare your taxes independently, ensure your software is up to date and reflects current laws.

13. Failing to Report Cryptocurrency Transactions

The IRS has increased scrutiny on cryptocurrency transactions, requiring taxpayers to report gains and losses accurately. Failure to report these transactions can result in penalties and audits.

How to Avoid: Track all cryptocurrency transactions, including purchases, sales, and exchanges, throughout the year. Use platforms or software designed for cryptocurrency tax reporting to calculate your capital gains or losses. Include the correct information on your tax return to stay compliant with IRS requirements.

14. Overlooking Foreign Income and Assets

If you have foreign bank accounts, investments, or income, failing to disclose them can lead to severe penalties, including those under the Foreign Account Tax Compliance Act (FATCA). This is particularly relevant for U.S. citizens living abroad.

How to Avoid: If you have foreign assets exceeding $10,000 at any point during the year, file the Report of Foreign Bank and Financial Accounts (FBAR) using FinCEN Form 114. Include all foreign income on your tax return, and consult a tax professional if you’re unsure of your obligations.

15. Not Taking Advantage of Retirement Contributions

Failing to contribute to retirement accounts like 401(k)s or IRAs not only misses an opportunity to save for the future but also forgoes valuable tax benefits. Contributions to certain retirement accounts can reduce taxable income.

How to Avoid: Contribute as much as possible to tax-advantaged retirement accounts, staying within the annual limits set by the IRS. Many employers offer matching contributions to 401(k) plans, which effectively doubles your savings. Consult a financial advisor to optimize your retirement savings strategy.

16. Making Frivolous Tax Claims

Submitting claims based on false information or arguments that the tax system is invalid can lead to frivolous tax penalties. The IRS takes such actions seriously and imposes substantial fines for frivolous submissions.

How to Avoid: Always file accurate and truthful tax returns. Avoid relying on unverified advice or schemes promising significant tax savings through questionable methods. If you’re unsure about a deduction or credit, consult IRS guidelines or a professional.

17. Failing to Amend Errors on Past Returns

Discovering errors on past tax returns but failing to correct them can lead to further complications. Whether it’s unreported income or incorrect deductions, these mistakes may surface during an audit or review.

How to Avoid: If you identify a mistake on a previously filed return, file an amended return using Form 1040-X. Address the issue as soon as possible to minimize penalties and interest. A tax professional can help ensure your amendment is filed correctly.

18. Neglecting to Protect Yourself from Identity Theft

Identity theft can occur when someone uses your Social Security number to file a fraudulent tax return. Victims often face delays in receiving refunds or dealing with fraudulent claims.

How to Avoid: Protect your personal information by using strong passwords for online accounts, avoiding phishing scams, and filing early to prevent identity thieves from using your details. If you suspect identity theft, contact the IRS immediately and file Form 14039, Identity Theft Affidavit.

19. Relying Solely on Refund Anticipation Loans (RALs)

Refund anticipation loans may seem convenient but often come with high fees and interest rates. Taxpayers relying on these loans might lose a significant portion of their refund.

How to Avoid: Opt for direct deposit of your refund, which is faster and eliminates the need for a loan. Plan your finances so you’re not dependent on receiving your refund quickly. If you’re considering an RAL, review the terms and fees carefully.

20. Improper Use of Business Expenses

Some taxpayers attempt to claim personal expenses as business deductions, which can trigger audits and penalties. Others fail to claim legitimate business expenses, missing out on valuable tax savings.

How to Avoid: Keep detailed and organized records of all business-related expenses and ensure they are clearly separated from personal expenses. Consult IRS guidelines on deductible business expenses or work with a tax professional to ensure compliance and accuracy.

21. Failing to Plan for Life Changes

Major life events such as marriage, divorce, having children, or changing jobs can impact your tax situation. Neglecting to adjust for these changes can lead to errors or missed opportunities.

How to Avoid: Update your filing status, exemptions, and withholding allowances when significant life changes occur. For example, a change in marital status may make you eligible for a different filing status. Seek advice from a tax advisor to ensure your tax return reflects your current circumstances.

22. Ignoring the Statute of Limitations

The IRS generally has three years to audit your return, but if you fail to report more than 25% of your income, this extends to six years. For fraudulent returns or no filing at all, there is no statute of limitations.

How to Avoid: File accurate and complete returns to avoid extended audit periods. Keep tax records for at least three years, or longer if your circumstances warrant it, such as unreported income or significant deductions.

23. Filing Under the Wrong Taxpayer Identification Number (TIN)

Some taxpayers mistakenly file their returns using an incorrect Taxpayer Identification Number (TIN) or Individual Taxpayer Identification Number (ITIN). This can result in delayed processing, rejection of the return, or even penalties.

How to Avoid: Always ensure that the TIN or ITIN you use matches the one issued to you by the IRS. Double-check your identification details and ensure they are consistent with all supporting documents.

24. Failing to Properly Classify Workers

Employers often misclassify employees as independent contractors to avoid payroll taxes. This mistake can lead to audits and penalties for misclassification under IRS rules.

How to Avoid: Understand the IRS guidelines for distinguishing between employees and independent contractors. Use Form SS-8 to request an official determination from the IRS if you’re uncertain about a worker’s classification.

25. Neglecting Backup Withholding Obligations

Certain payments, such as interest or dividends, require backup withholding if the payee doesn’t provide a valid TIN. Failing to withhold and report these payments can result in IRS penalties.

How to Avoid: Verify that all payees provide accurate TINs using Form W-9. Apply backup withholding when required and report it appropriately on Form 1099.

26. Improperly Reporting Rental Income

Many taxpayers fail to accurately report rental income or incorrectly deduct expenses related to rental properties. This can lead to penalties and increased scrutiny.

How to Avoid: Keep detailed records of all rental income and allowable expenses, such as repairs, property taxes, and mortgage interest. Use IRS Publication 527 as a guide for reporting rental property activity correctly.

27. Failing to Disclose Bartering Income

Bartering, or exchanging goods and services without money, is considered taxable income. Failing to report these transactions can lead to audits and penalties.

How to Avoid: Treat bartered goods or services as income and report the fair market value on your tax return. Use IRS Form 1099-B if applicable.

28. Misusing Retirement Account Funds

Withdrawing funds from a retirement account, such as an IRA or 401(k), before the age of 59½ can result in early withdrawal penalties and income tax obligations. Many taxpayers overlook these consequences.

How to Avoid: Avoid withdrawing from retirement accounts unless absolutely necessary. If you must withdraw early, check whether you qualify for exceptions, such as medical expenses or buying a first home, to avoid penalties.

29. Failing to Plan for the Alternative Minimum Tax (AMT)

The AMT is a separate tax system designed to ensure high-income earners pay a minimum amount of tax. Some taxpayers are caught off guard when they are subject to it.

How to Avoid: Use tax software or consult a tax professional to determine whether the AMT applies to your situation. Plan your finances accordingly, especially if you have significant deductions that could trigger the AMT.

30. Improper Reporting of Stock Sales

Reporting stock transactions incorrectly, such as failing to include the cost basis, can lead to inflated gains and higher tax liabilities. This is a common mistake for investors.

How to Avoid: Keep detailed records of all stock purchases, including the purchase price and associated fees, to calculate the correct cost basis. Use Form 8949 and Schedule D to report stock sales accurately.

Take Control of Your Tax Situation Today

If you’re facing tax issues with the IRS, don’t navigate the complexities alone. J&J Tax Resolutions Group LLC is here to help. From ending wage garnishment to releasing tax liens, our experts handle the IRS directly, so you don’t have to.

Call 516-821-8193 now or request your consultation online!