I Forgot to Report All My Income – Will There Be Any Consequences?

On: January 11, 2024

The IRS wants perfect tax returns with no errors but the reality of it is that is just not possible. Between human error and computer error, there are bound to be returns that require attention. 

One of the most common issues that arise with taxpayers and puts the IRS on alert is underreported income. Failing to report income can happen for a variety of reasons from misplacing a W-2 to forgetting that you held a job for a week or two. 

No matter the reason behind your underreported income, it is important to get the situation handled and under control before the IRS starts to come after you. If you have underreported income, reach out to the tax team at Leading Tax Group today. 

What Is Underreported Income?

Underreported income is income that you do not claim on your tax return. While it is considered fraud to purposefully underreport your income, most taxpayers do not underreport on purpose. 

The IRS is alerted to underreported income when there is a mismatch of information on your filed tax return and the information they have on their computer. For example, if you filed your return and said you held one job the whole year and made $40,000 but you actually had an additional job for two weeks in the summer and made $500 on top of the $40,000, a mismatch would occur. 

What Happens When My Income is Underreported?

It is no joke to underreport your income, so the moment you realize that you did, you need to address the situation. Sometimes, underreporting your income means you did not pay enough in taxes and you may owe additional tax to the IRS. 

There are consequences associated with underreporting your income and some of them can be quite a blow. 

Auditing May Occur 

If you have underreported income, it is likely that the IRS will quickly catch it through their computer system and audit you. Many audits are automatically triggered, so this means that the computer system catches the error and flags your return. In some cases, you will simply receive a letter from the IRS explaining the mismatch and the proposed adjustment, and sometimes, the IRS will want to conduct a complete tax audit. 

Penalties May Occur 

One of the things you can almost always count on is if you have underreported income, you will probably have a penalty attached to it. The IRS can add penalties to your tax liability and make you responsible for paying them. 

Larger Than Life Tax Bill 

Imagine inputting that your income was $30,000 when you meant to put in $300,000! A simple mistype or mistake can lead to serious tax bills. Should you underreport your income, you may get presented with a large tax bill that the IRS wants you to pay right away. 

Criminal Charges Can Happen 

While unlikely and not common, if the IRS believes that you are underreporting your income to evade taxes, they can criminally prosecute you for this. 

Leading Tax Group Can Help with Underreported Income 

The moment you discover that you underreported your income, contact Leading Tax Group. Swift action can limit the tax liability and penalties that you will face. The IRS understands that mistakes happen, but when they do, you need to make sure you correct them. Failing to do so can lead to issues with the IRS. 

If you have underreported income, don’t be ashamed and simply let our team know so that we can get it handled for you. We do not want to see your underreported income turn into a huge tax debt that you cannot afford. There are payment options available through the IRS should you end up with a large tax bill after your tax return is corrected. 

The IRS tax experts at Leading Tax Group are here to help you. Contact our office today to learn more about how we can help you get your tax returns refiled and corrected.