Filing taxes is never a fun process, but there are several crucial things that taxpayers need to look out for in 2020.
With the laws continually changing, it’s essential to know what to expect in terms of tax issues that could cause problems if you’re not aware of them.
Read on to discover some of the most critical and pressing challenges taxpayers will likely face in 2020.
1. IRS Customer Service is (Still) Lacking
2. Your Refund Could be Delayed
Oh, the delay.
This is another issue that seems to happen every year, and it looks like 2020 will be no exception.
While tax fraud is undoubtedly something that everyone should be aware of and concerned about, the IRS is using filters that can cause refund delays.
When you file your return, the IRS may perform a quick check to ensure that it’s actually you submitting the information and receiving a refund.
This might cause you to get stuck in a queue, resulting in a refund delay.
The problem with delayed refunds arises when they have legitimately filed returns, yet the taxpayer is still stuck waiting.
This can be especially difficult for low-income families who rely on their tax refunds to help them pay bills and other expenses.
A report showed that rates as high as 71% for false-positive “fraud” flags. That means that even if your return is completely legit, the IRS could hang onto your money until they’ve verified everything in their system-yikes.
3. The Free File Option and Tax Issues
4. Communication Confusion
One of the most common tax issues that people have is when they receive a written letter or notice from the IRS.
These notices can cause people to panic or become confused. What does the IRS need from them to come to a resolution?
This problem became much worse when the IRS decided to use something called a combination letter. This letter includes the initial contact letter and 30-day notice, which can cause many taxpayers to misunderstand what they need.
The combination letter started to be used in 2015 and continued through the 2019 fiscal year. It’s uncertain whether or not the IRS will continue to send these letters in 2020, but it’s something every taxpayer should be aware of.
When people received the combination letter, it offered very little time for them to provide the documentation the IRS needed.
30 days is like seriously not enough time to resolve questions or concerns. Sorry about it IRS, but can you please calm down on the heart attack tactics?
Confused About Your Taxes?
5. Tax Issues with Adjusting Withholdings
The 2018 tax code overhaul lowered the tax bracket for many individuals in order to put more money into peoples’ pockets throughout the year.
While that is definitely not something to complain about, it also caused a lot of confusion during the tax return season.
The IRS issued new withholding tables that explained to employers how much tax they should hold from their employees’ earnings. While workers saw their paychecks increase, it also created a nasty surprise when it came time to file.
In fact, many workers noticed that they ended up owing the IRS money instead of the normal refund they expect to receive.
That’s because they had too little tax taken out during the year, resulting in a shortage of withholdings.
If you were someone who owed money on your recent returns but never adjusted your withholding, now is the time. Readjust your W4 with your employer, so you’re less likely to end up owing the IRS this year.
No matter what time of year it is, it’s very beneficial to go ahead and adjust your withholdings now. That way, you will be less likely to encounter an ugly surprise moving forward whenever you go to file.
6. Taxpayers Are Not Getting the Help They Need
Regardless of the tax year, the laws are continually changing, and it can be tough to keep up.
To combat this, it’s crucial to hire professional help if your returns are complicated or complex.
Many taxpayers fail to ask for help during tax season and then wonder why they run into trouble. It’s essential to find an educated and up to date tax pro that will help you relax along the way.
If you don’t get help with your taxes, you could end up in some dangerous hot water if any of the new laws apply to you. Don’t sizzle and burn, consider hiring the assistance you need well in advance of tax season.
Many professionals will get overloaded and overbooked at the peak of the season.
When you hire a CPA, tax attorney, or another professional service, make sure you give them all of the pertinent information and documentation they’ll need.
The more you give them, the more accurate your tax return will be.
Business owners, gig workers, and freelancers are particularly susceptible to tax issues. Make sure you keep your receipts and keep good records of your earnings throughout the year.
7. The IRS is Tough to Navigate
8. Problems with Earned Income Tax Credit Payments
9. Issues with Private Debt Collection
Owing the IRS is stressful enough, but now the institution has expanded its private debt collection program. This program adds additional burdens on taxpayers who are already dealing with economic hardships.
Congress ordered the Private Debt Collection initiative in April of 2017, and by September of 2018, approximately $5.7 billion in debts were overtaken by private debt collectors.
The idea of moving toward private debt collection was to save money.
Unfortunately, the use of private debt collection has actually cost more than it has received in revenue.
There are many specific issues with moving from an IRS-based collection program over to a private one.
First, almost half of taxpayers who entered into an installment agreement have incomes below their allowable living expenses. This means that they agreed to repay their debts at a rate that would not allow them to afford basic living costs.
Other taxpayers whose debts were assigned to a private debt collection company had an income at or below 250-percent of the federal poverty level.
An increasing number of people in collections defaulted, even after entering into an installment agreement with a private debt collection agency.
The job of collecting tax revenues should be left to the IRS. Not all private collection companies are regulated, and they could collect additional fees outside of the limits that the IRS has in place.
Congress expected the transition over to private debt collection to increase revenue. However, this program currently seems to be in trouble, and it’s causing more harm than good.
Keep in Mind That Refunds Do Not Mean You're Safe From an Audit
Simply because you receive a tax refund check does not guarantee you are safe from any audit. The IRS reserves the right to audit the majority of returns for up to three years.
The IRS often sends a tax refund before approving the payment. Any processing of a refund check usually will occur prior to any federal tax audit determination. So in the event you mistakenly receive a tax refund, it is possible that you will have to pay that money back with interest.
Be cautious about your tax refund
It is therefore important for US taxpayers to be cautious whenever anything seems out of the ordinary pertaining to a tax refund. For example, receipt of a refund that seems too large could mean that you will receive a notice explaining what occurred in a few days. Under such a circumstance, you may want to delay cashing the check until you receive this notice.
On the other hand, if you receive a refund that was smaller than what you requested on your returns, you should also receive an explanation regarding the difference in a few days. A smaller refund could be due to a mistake in math, a tax penalty or some sort of exemption mistake.
Remember that reporting errors can result in audits. An audit can also mean you will be subject to wage garnishments and liens. Under the worst possible circumstances, cashing a refund check that is too large and then spending the proceeds could result in jail time. That is something we all wish to avoid.
If you have questions regarding a refund, you may wish to speak to an experienced tax lawyer before taking any action.