Don’t Let These Warning Signs Turn Your 2024 Tax Return Into a Nightmare – Here’s When to Call the Professionals

Tax season can be overwhelming, but certain red flags should immediately signal that it’s time to seek professional help before filing your 2024 return. Ignoring these warning signs could lead to costly mistakes, IRS audits, or even legal complications that far exceed the cost of professional assistance.

Major Life Changes That Complicate Your Tax Situation

If you experienced significant life events in 2024, your tax situation likely became more complex than a simple W-2 filing. Tax professionals can be a big help with taking the stress out of doing your taxes, especially if you’re self-employed, have experienced a major life event like marriage or divorce in the last year or have any other financial circumstances that make filing more complicated. Marriage, divorce, having a child, or caring for elderly parents can dramatically change your filing status, deductions, and credits available to you.

Inheritance can be hard to know if you owe taxes on your inheritance, so if you received money or assets you should strongly consider consulting a professional. Depending on the financial support you provide for an elderly parent, you might be able to claim them as a dependent or qualify for tax breaks. These situations require expertise to navigate properly and maximize your tax benefits.

Business Income and Self-Employment Red Flags

Self-employment income, even from gig work or side hustles, creates immediate complexity. Whether you are a full or part-owner of a business, you’ll need to file a K-1 with a professional who can advise you on how to report business income. This requires you to complete a separate tax return that includes your individual income, losses, deductions, credits, and more.

Business owners face particular scrutiny from the IRS. Side businesses that show losses in multiple years are subject to review for actual profit motivation under the hobby loss rules, which is a schedule C red flag that the IRS can and does audit regularly. The IRS has been onto this trick for several years now and will audit businesses that show losses or that have the appearance of trying to off-set legitimate tax liability.

Income Reporting Discrepancies and Missing Forms

One of the biggest audit triggers involves unreported income. For many taxpayers, missing income is easy for the IRS to catch because of so-called information returns, which are tax forms that employers and financial institutions send to the agency. For example, you may have freelance income reported via Form 1099-NEC or investment earnings on Form 1099-B. Steber said “mismatched data” is the No. 1 thing that gets taxpayers into trouble. “If you leave stuff off [your return], that could get a question,” he said.

It is almost automatic that the IRS will do a cross-check to make sure all of the income reported on Form 1099 is also reported on the appropriate lines of the tax return. If you haven’t reported income from the various forms, 1099s, W-2s or K-1s, you will likely be audited. If you received multiple 1099s, have cryptocurrency transactions, or sold investments, professional help becomes essential.

Significant Deductions and Complex Property Transactions

Large deductions relative to your income raise red flags. If the deductions, losses, or credits on your return are disproportionately large compared with your income, the IRS may want to take a second look at your return. Taking a big loss from the sale of rental property or other investments can also spike the IRS’s curiosity.

Home office deductions, particularly for employees working from home, present special challenges. Employees who work from home (as opposed to self-employed people) currently can’t claim a home office deduction. Now that more people are working from home, the IRS may look for taxpayers trying to bend the rules.

Multi-State Tax Issues and Foreign Assets

Residency or employment in multiple states can lead to a more complex return due to varying state tax laws and potential double taxation issues. Similarly, foreign bank accounts create serious compliance requirements. Failure to report a foreign bank account can lead to severe penalties. This means electronically filing FinCEN Report 114 (FBAR) by April 15, 2025, to report foreign accounts that combined total more than $10,000 at any time during 2024.

When You’re Already Behind or Facing IRS Problems

If you have unfiled returns from previous years, owe back taxes, or are facing IRS collection actions, professional help isn’t just recommended – it’s crucial. Unfiled returns create serious problems because penalties compound monthly and the IRS can file substitute returns that usually show higher taxes than you actually owe. We prioritize getting all missing returns filed correctly before pursuing other resolution options. The IRS won’t consider installment agreements or offers in compromise until you’re current with all required filings. We prepare accurate returns that claim all legitimate deductions and credits you’re entitled to, often reducing what you owe significantly.

The Cost of Getting It Wrong

The stakes are higher than ever for accurate tax filing. For those with high net worth, the process of calculating tax deductions requires an experienced eye to correctly evaluate multiple incomes, assets, and investments. Thus, it’s crucial to regularly consult a tax professional, as they will guide you in navigating these convoluted situations and avoiding audits, back taxes, and delinquent fees that accrue when you file incorrectly.

Professional tax preparers bring more than just technical knowledge. Preparing tax returns can be time-consuming and intricate, particularly for individuals with complicated financial situations. A tax professional can manage the whole process, saving time and reducing stress.

Finding the Right Professional Help

When choosing professional help, look beyond big-name chains. Corsello advised looking beyond big-name tax preparation companies and seek out an independent CPA or enrolled agent. They have completed extensive testing and continuing education to ensure they know the tax code inside and out, and they’ll be able to provide you with much more effective help.

For residents in Pennsylvania and New York dealing with complex tax situations or IRS problems, tax professionals Wayne County at All County Tax Resolution provide specialized expertise in tax resolution and preparation. All County Tax Resolution started because too many hardworking people in Wayne County, Lackawanna County, Monroe County, Pike County, and Susquehanna County were getting crushed by tax problems they never saw coming. That’s why we focus on one thing: getting you out of tax debt as quickly and affordably as possible.

Don’t Wait Until It’s Too Late

The key to successful tax filing is recognizing when you’re in over your head. No one wants to miss out on deductions, pay more than they need to, or try to amend a mistake on their tax return that could otherwise be avoided. Even if you use tax software, online systems may miss something that should be reported. In contrast, a qualified tax professional offers specialized knowledge and assists in navigating complex tax laws using cost-effective methods. They work to minimize tax, maximize returns, and safeguard your wealth.

If you’re experiencing any of these red flags, don’t gamble with your financial future. Professional tax help isn’t an expense – it’s an investment in avoiding costly mistakes, maximizing your refunds, and ensuring compliance with an increasingly complex tax code. The peace of mind alone is worth the cost, and in many cases, professional preparation can actually save you money through legitimate deductions and credits you might have missed.