Occasionally Avvo receives inquiries from the press about current legal issues for news articles. The following question was submitted to us by a reporter. Attorneys responding to this question may be quoted in the story, or contacted directly by the reporter.
As tax time approaches, what are 10 accounting mistakes that tax lawyers have seen, that can land consumers in legal trouble with the IRS?
I am seeing unmarried couples who file as "married filing jointly". Apparently there is a widespread misconception that when people live together as a couple for a while (some people think 5 years, some people think 7 years), they are 'married', and so act accordingly, including filing their taxes.
While there are states that recognize common law marriage, this is a realtively small number of states,and they have specific requisites for a relationship to qualifiy as a common law marriage. Many long-term cohabitation relationships would not qualify as common law marriages.
Lawsuit / Dispute Attorney
Tax return filers sometimes do not accurately state interest and dividend payments received during the tax year. Either they forget about a dividend that was paid, or file early before the final statements are obtained from the investment institution. This year some statement due deadlines by investment companies to their investors were moved back making this inaccuracy happen a bit more than before. Also, with filers wanting to file earlier this year to capture refund dollars quicker given the current economy, even more of this type of error is going on.
Dividend payments along with interest income statements are reported to the IRS by brokerage houses, banks and many other types of investing and money institutions. Those payments are cross-checked and lead to the IRS sending out notices of error. Even though those notices are themselves often wrong, this is happening more and more.