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March 09, 2021 | Posted in:

Expect the Unexpected from The IRS

No one likes surprises from the IRS, but they do occur from time to time. Here are some situations that could happen, and what to do about them.

An expected refund turns into a tax payment

Nothing is more deflating than expecting a nice refund and instead finding, you actually owe the IRS money.

What you can do: Run an estimated tax return. If it looks like you’re going to owe, adjust your federal income tax withholdings for the balance of 2021. If you’re self-employed, consider increasing your estimated tax payments due in April, June, and September.

Getting a letter from the IRS

If the figures on your income tax return do not match your W-2s and 1099s, you could get a letter saying that you’re being audited. These audits are now done by mail. The IRS will demand taxes on the amount of income omitted from your tax return.

What you can do: Check the information in the letter against your records. If the IRS has made a mistake, ask your accountant how to respond.

Getting a tax bill for an emergency retirement distribution

In 2020, you could withdraw from retirement accounts early without a 10% penalty if you were affected by COVID, but normal income taxes are still due on the withdrawal.

What you can do: Your retirement account administrator may have withheld funds automatically, so check your statements. If they did not, or the withholding was insufficient, consider sending an estimated tax payment now. If you are charged a withdrawal penalty in error, ask your accountant for help to get this charge reversed.

 

Contact an Alloy Silverstein CPA for guidance to your specific situation.

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