For tax laypeople, preparing and filing taxes can be a mentally taxing experience fraught with confusion and anxiety. The number of people experiencing this apprehension regarding their tax filings has only increased in recent years as, to promote their tax software offerings, numerous software companies have encouraged or commanded taxpayers to get their fair share of Uncle Sam’s tax refund. While the error-checking features in these programs have improved over the years, they are still extremely far from being foolproof. To be clear, it certainly does not take a fool to make a mistake or error when handling something as complex and multi-faceted as the U.S. Tax Code. In fact, thousands of well-intentioned taxpayers make mistakes while filing there taxes every year.

However, simply because others have made similar mistakes doesn’t mean that an error can’t have harsh consequences. The IRS agent may misperceive your honest mistake along with another behavior as a sign that your tax noncompliance was voluntary or intentional. However a tax mistake does not have to jeopardize your financial health or your freedom. Pro-active taxpayers can often reduce or eliminate the penalties they face. The Tax Law Offices of David W. Klasing can assist taxpayers in identifying their errors and taking appropriate action to reduce or eliminate the potential civil or criminal tax consequences.

Taxpayers Can Amend their Tax Return

Taxpayers who have filed their tax return via forms 1040, 1040EZ, 1040A, 1040NR, or 1040EZ-NR may generally make amendments to their previously filed taxes by filing form 1040X. While the 12-page instruction manual for the form 1040X is available online, we can work to digest the purpose of this form, some of its provisions, filing procedures, and other important aspects. However, this information is merely a primer and cannot address the more technical tax considerations or how certain language and provisions in the tax code will apply to your particular situation.

To begin with, Form 1040X should only ever be filed after you have already made an initial tax filing. When you file a 1040X for an amended return, the IRS will consider the information contained in 1040X to be your new tax return. 1040X can be filed if:

  • As per Regulations sections 301.9100-1 through -3, you want to make certain elections after the deadline has already passed.
  • You wish to correct a previously filed return.
  • You want to alter changes that the IRS has made to your original tax return.
  • You want to claim a carryback for a loss or otherwise unused credit. Care should be taken before filing Form 1040X for these purposes because certain circumstances will require the taxpayer to file Form 1045 instead.

Aside from generalized errors, Form 1040X may also be filed when the taxpayer discovers that he or she is subject to special rules or qualifications. More common special situations include additional Medicare tax, wages and payments made to a qualified airline employee, claims for a refund for a deceased taxpayer, household employment taxes, distributions for qualified members of the military reserve, same-sex marriage and an array of other situations. The Tax Law Offices of David W. Klasing can assist a taxpayer in the proper handling of these and other situations requiring the filing of an amended return.

What if I Remembered an Offshore Account that I failed to Previously Disclose?

Since the strengthening of the Bank Secrecy Act’s FBAR obligation and the passage of the Foreign Account and Tax Compliance Act, cracking down on offshore tax evasion has been a major priority for the IRS and the Department of Justice. Taxpayers who have failed to make required disclosures of offshore accounts and assets are subject to harsh fines and penalties. In fact, under FBAR, even an honest mistake that results in non-disclosure can be punished by a fine of up to $10,000. If the investigating agent believes that the failure to disclose was willful – the voluntary or intention disregard of a known legal duty – then penalties become even more harsh and can quickly exceed the account’s original balance.

However one of the varieties of the Offshore Voluntary Disclosure Program (OVDP) can provide a pathway back to compliance. Under terms of the program, the taxpayer agrees to come forward and reveal all noncompliant acts voluntarily. In exchange for the taxpayer coming forward, penalties and tax consequences are mitigated and, provided that the taxpayer makes a complete & proper disclosure, the IRS will typically refrain from referring the matter for criminal prosecution. However, taxpayers who wish to take advantage of the current program should act quickly because the IRS reserves the right to change the program’s terms at any time. Past changes have been unfavorable to the taxpayer and there is little evidence to suggest that this pattern is due for a change.

To schedule a reduced rate initial tax consultation with the tax professionals of the Tax Law Offices of David W. Klasing, call us at 800-681-1295 or contact us online.