Paying one's taxes is a duty by any law-abiding citizen. If you don't pay your taxes, you could get in trouble with the law, which only makes things worse. While it's not easy to settle tax debt, many taxpayers still experience problems even when they pay taxes. These problems are a nuisance because they add to your stress level and cause you to spend more time and energy on your debt. After all, it's not fun getting calls from the IRS and getting letters from them in the mail saying that you owe them money.

This article lists down some of the most common tax-related issues one could face. Read on below to get started.

#1 - Identity Theft

Identity theft is among the most common tax problems. You may be a victim if someone uses your social security number, name, and other identifying information to file a tax return or claim a tax refund. This problem is usually challenging because you will receive the refund and may not know about the fraud until you check your return and see that someone else filed it. You may not even be aware that your social security number and other identifying information had been stolen until you file your taxes and someone else claims your refund.

You can reduce the likelihood of being a victim of identity theft if you report the theft to the police and inform the IRS by filing a Form 14039, Identity Theft Affidavit.

#2 - The Tax Code Reform

Many portions of the Tax Code are open to interpretation. This means that when you file your tax return, you have to interpret the law to determine what you owe, which is usually an arduous process. Many taxpayers mistake filing their taxes based on their understanding of the law, but they may not fully comprehend the law.

As a result, they sometimes end up filing an incorrect return. For example, you may have lost money in the stock market but didn't include a portion of the amount you lost. However, you may have misunderstood the law, which means you may have to pay taxes on the portion you didn't lose. This can cause you to fall into a complicated tax situation. You may be able to resolve this issue by working with a tax preparer or with a CPA.

#3 - Alternative Minimum Tax

Taxpayers who have more than the standard deduction and personal exemption usually file the Alternative Minimum Tax (AMT). This tax aims to make sure that everyone pays a certain level of taxes. It has a base amount of income that tax filers with higher incomes must pay.

However, tax filers who deduct for state and local income or sales tax, or state and local property tax, may end up paying more taxes than they usually would. If a deduction results in additional taxable income, you may have to pay the AMT. You may be able to decrease the amount of tax you owe by getting a refundable tax credit or a deduction that can lower your taxable income.

#4 - Delays with Adoption Credit

One of the best ways to get an excellent tax credit is to adopt a child. You might qualify for a $13,570 tax credit if you adopt a child who is younger than 18 or a disabled adult. If you don't adopt a child by the end of the year in which you file your taxes, you may not be able to qualify for the credit.

Even if you adopt after the end of the year, you may not get the entire credit because your adoption may not be finalized. In addition, you may only get some of the credit if you adopt more than one child simultaneously. To get the credit, you have to file Form 8839, Qualified Adoption Expenses.

Conclusion

Tax problems can add to your stress, which is why you need to learn how to deal with them. If the issues are too challenging to resolve, you can always consult a tax professional to help you figure things out.

Tottax provides top-quality personal tax services in Denver. We understand that time is of the essence, so we’ll make sure that your taxes are done correctly and filed on time. Contact us today to learn more!