What are some common reasons why people get into tax trouble?

After over thirty (30) years of tax law practice, Moskowitz LLP knows why people get into tax trouble. The most common reasons:

  • Books and Records are a Mess. This is the number one reason people get into tax trouble. Every person has the best of intentions from the beginning, but life responsibilities or failing to understand just how critical it is to have good records (regardless of if you are an employee or self-employed) often leaves books and records a mess, creating confusion and mistakes. This often results in missed tax deductions, and should you get audited, trouble substantiating the tax positions you took on your tax returns.
  • I’m too busy. When a person’s life is out of control and too overwhelmed to complete the tax paperwork. Typically, that person believes they will get to it ‘next week’ but never does. Then the problem snowballs and suddenly they are even more overwhelmed. The problem then snowballs until the IRS or State of California (or other taxing entity) catches the problem and contacts them – often with tax liens or bank account levies.
  • Life disruption. Life events such as death, illness, cancer, divorce, or disaster derail some people from performing their tax duties and responsibilities.
  • Don’t have the money to pay the tax. When people know that they cannot pay the tax, they often simply try to ignore the issue and hope that it goes away.
  • Unfortunately, the IRS and State taxing agencies will catch on to them within a relatively short amount of time, and then there are penalties and interest tacked on to the balance that they already could not pay.

    Misunderstanding the tax laws and taking exemptions, deductions, and credits that they are not qualified to claim. Resulting in a tax investigation, tax audit, tax bill and/or penalties and interest.