Six times to call a tax advisor after April 15
The annual tax filing ritual is not the only time a taxpayer may need the help of a tax advisor. According to the IRS Oversight Board, 43 percent of taxpayers have to contact the IRS for something other than filing their returns. If a taxpayer doesn’t have the time to work with the IRS or the expertise to interpret the tax code, here are six times a tax advisor can help after the April filing deadline.
#1: When a taxpayer’s life changes
Life changes often mean tax changes. Marriage, divorce, the birth of a child, a child moving out and supporting themselves, moving, going back to school, becoming self-employed and many other life events generally will impact a person’s tax situation. If a taxpayer addresses these events as they occur, rather than waiting until April, they may avoid some surprises at tax time. A tax professional may even be able to help them immediately take advantage of their new tax situation.
#2: When a taxpayer needs to estimate taxes
Financial transactions, expiring tax benefits and new tax benefits may all impact a taxpayer’s liability. Estimating their taxes before filing can help taxpayers budget for their tax bill. It also can help inform other important decisions, like whether to sell a certain stock, when and how to convert a retirement account, when to spend funds in a flexible savings account or how to make charitable donations.
#3: When a taxpayer with Marketplace health insurance faces an unexpected change
Many taxpayers who enrolled for health care through the Affordable Care Act Marketplace receive advance credit payments to help them pay their insurance premiums. The advance is calculated on projected incomes and life situations during enrollment. As life changes, the actual premium tax credit, which is calculated on the tax return, may be higher or lower than the advance. If the actual PTC is higher, the taxpayer receives the difference as a refundable credit. If the actual PTC is lower, taxpayers will have to repay some or all the excess depending on their income level. Taxpayers do not need to wait until after the end of the year to find out about an unexpected tax bill. A tax professional can help the taxpayer understand when to notify the Marketplace to adjust their advance during the year and diminish the impact of any discrepancy.
#4: When a taxpayer is having trouble paying their taxes
For 2014 returns, 28.7 million taxpayers filed a return with a balance due. A tax professional can help taxpayers figure out their payment options, including signing up for an installment agreement. In some instances, the taxpayer may qualify for an “offer in compromise” with the IRS for less than the total amount of tax due.
#5: When a taxpayer receives an “underreporter” notice
According to government data, as many as one out of six tax returns do not match information statements on file with the IRS. That means the IRS would like to reconcile millions of tax returns with potential underreporting.
There could be many reasons for an underreporter notice, including IRS error. In fact, many underreporter notices are resolved with no change to the return. One out of six individuals will face this potential issue – and even more small businesses. An underreporter notice may not always indicate an error and a professional can help get to the bottom of the issue. Tax professionals can also provide expert help to resolve any penalties resulting from an underreporter inquiry.
#6: When a taxpayer is audited
In an audit, the odds are in favor of the IRS. If a taxpayer gets audited, the IRS may determine the return needs an adjustment. Of the 1.56 million audits in 2013, the IRS made changes to almost 90 percent of the individual returns examined and 70 percent of the corporate returns examined.
When the IRS completes an audit, individual taxpayers are left with an average bill of more than $17,000 per year examined in a field audit and $7,000 per year examined in a mail audit.
Not only can audits be costly without supporting documentation and a thorough knowledge of the tax code and taxpayer rights, but they also can be time consuming. Taxpayers without the time or knowledge required to work with an IRS examiner should seek out a tax professional.
Tax compliance is a year-round obligation. In some cases, half the difficulty is knowing when to seek help.
By Annelise Wiens
As the newsroom editor, Annelise Wiens is interested in more than just tax and industry news, but the stories of H&R Block's 80,000 associates, their communities and H&R Block's world headquarters in Kansas City, Missouri. Wiens joined H&R Block in 2014 from a public relations agency, where she worked with clients in the financial services industry. Before that, she worked as a communicator for a senior member of the United States House of Representatives. She graduated from Biola University in La Mirada, CA with a degree in history.