The Most Common Compliance Issues You'll Receive an IRS Notice For

Receiving IRS notices can cause concern, but not all tax notices result from taxpayer errors. As a business leader, understanding the contents of these notices and taking prompt action is vital to staying compliant, avoiding fines, and meeting deadlines. 

With numerous daily responsibilities, delegating IRS notices becomes crucial to free up valuable time for core business operations. Knowing the most common IRS compliance issues empowers companies to maintain good standing with the IRS by directing each notice to the appropriate manager or team. 

Our team at Notice Ninja Inc. has compiled a list of the six most common IRS compliance issues to help corporations avoid common tax mistakes. 

Underreporting Income 

The IRS may issue a notice for underreported income if they find conflicting information regarding your reported income. Ensure your tax return accounts for all earned income, including interest, dividends, settlements, and other sources. 

Math Errors in Accounting 

Tax return math errors can be more than simple addition or subtraction mistakes. Common math errors include inconsistencies in entries, incorrect use of information from tax tables or schedules provided by the IRS, and omissions of required information. 

Failing to File Your Tax Return 

If your company refrained from submitting required tax return forms or if the IRS did not receive your return, it will result in a reminder notice. Respond promptly to avoid the failure-to-file penalty, which can be 5% of the unpaid taxes for each month or part of a month that the return is late, up to 25%.

Not Paying Your Taxes 

Failure to pay taxes on time leads to a failure-to-pay penalty. This penalty applies if you pay the tax reported on your return after the due date or approved extended due date. The IRS offers tax relief programs to assist businesses facing difficulties with payments. 

Errors with Claimed Credits or Deductions 

Errors with claimed credits or deductions can cause delays in refunds. The IRS may request additional documentation or propose changes if they find errors with credits claimed. Common reasons for these errors include incorrect claims, inaccurate reporting of income sources, or miscategorization of income. 

Requests for Other Information 

The IRS may issue a notice requesting additional information to verify your tax return. Common additional documents requested include proof of revenue, supporting documentation for deductions or depreciation, and other relevant records. 

How Can You Stay on Top of Tax Notices? 

To prevent tax filing mistakes and to never miss an IRS notice, Notice Ninja Inc. offers notice automation software, NOTICENINJA. This essential business tool streamlines your tax notice management, saving you time and money. Contact our team to learn more about how NOTICENINJA can benefit your corporation.