You had every intention of filing your tax return before 11:59 P.M. on April 15, and you were chugging along nicely to meet that goal—until you hit a roadblock.
Maybe you realized you never received a crucial document in the mail, or you misplaced some receipts necessary to back up that big write-off you were counting on.
If so, take comfort in the fact that you're not alone—or doomed to miss the deadline.
"Confusing tax-time problems are quite common," says Andrew Poulos, an enrolled agent and principal with Poulos Accounting & Consulting, Inc., in Atlanta. "And while they may seem daunting at first, most issues can be easily fixed—if you know what steps to take."
To help you navigate the season's trickiest head scratchers, we're laying out five common tax conundrums—plus Poulos' quick tips for putting you back on track faster than you can cash your refund check.
Tax Conundrum #1: There's a Mistake on Your W-2
Why It’s a Problem If your W-2—the federal form issued by your employer that indicates how much you’ve earned and paid in taxes for the year—reports the wrong amount of income, the I.R.S. could slap you with an inflated tax bill.
How to Fix It As soon as you realize there’s an error, immediately contact your employer and ask them to issue a corrected form. Typically, they’ll do so quickly, as it’s in their best interest to accurately report the full amount they’ve paid in taxes for each employee.
“But if they don’t, call the I.R.S. and file a complaint,” Poulos says, adding that it'll then contact your employer asking for the correction on your behalf.
Unfortunately, this process can take several months, so you may need to file an extension—but the good news is that the I.R.S. will have records showing that you’re working toward a resolution.
Tax Conundrum #2: Your Former Employer Went Out of Business
Why It’s a Problem If you haven't received a W-2 and therefore can’t prove that your employer paid taxes for you because they've shuttered, it’s possible that the I.R.S. could bill you for a year’s worth of back taxes—plus interest and other penalties.
How to Fix It If your previous company went under before issuing you a W-2, you can file a substitute wage statement, known as the Form 4852, using information from your last pay stub to complete the document.
Can't find your last paycheck? Then estimate your numbers—but very carefully.
“You’ll have to substantiate your figures on Form 4852 should you ever get audited by the I.R.S.," Poulos says. "That’s why it’s so important to use the most accurate figures possible.”
Tax Conundrum #3: You Didn't Receive a 1099
Why It’s a Problem Unlike full-time employees with W-2s, independent contractors are typically on their own when it comes to reporting their income and paying taxes. So it's crucial to keep track of the 1099's issued by clients in order to back up your income claims.
How to Fix It If a company fails to send you a 1099, Poulos says it's not the end of the world. “Because there are no withholdings reflected on the 1099, your own records of income are enough to file your tax return,” he explains.
That said, you need to be vigilant about keeping records of client invoices, deposit receipts and bank statements—all of which can be used to compute your income and tax liability without a 1099.
“The I.R.S. has not given us specific instructions about what types of documentation to provide to show health insurance coverage. And that can be confusing."
Tax Conundrum #4: You’re Missing Substantiating Documentation for a Deduction
Why It’s a Problem If you choose to itemize your deductions, you'll need receipts or other supporting documents to prove how much you spent. Otherwise, the I.R.S. could disallow your deduction—potentially costing you more money in taxes and penalties.
How to Fix It “If you’re just missing a few records or receipts, you’re probably O.K.,” Poulos says—as long as you can come up with other ways to back up your right to a deduction.
For instance, if you want to deduct business travel, but failed to keep a detailed log of how many miles you drove to visit clients, Poulos suggests trying to re-create an accurate account using gas station receipts.
If you know how many miles you get to the gallon, then you can tally up how far you drove based on the number of times you filled up at the pump. Just be sure to deduct your personal use from the total mileage.
For other types of business deductions—like hotel stays or client meals—where you don’t have actual purchase receipts, a credit card or bank statement may do the trick.
Tax Conundrum #5: You're Confused About How to Prove You Had Health Insurance Coverage
Why It’s a Problem For the first time in 2014, all taxpayers must prove they have health insurance to avoid paying federal penalties.
If you bought a policy on the exchange, you’ll receive Form 1095-A as supporting documentation. But if you have private insurance—both taken out for yourself or provided through an employer—it’s a little trickier.
“The I.R.S. has not given us specific instructions about what types of documentation to provide to show health insurance coverage," Poulos says. "And that can be confusing."
How to Fix It For now, Poulos says he’s advising clients to offer up as much information as possible.
That could include copies of your insurance card, billing statements from your insurance provider, or your final pay stub, showing how much was deducted from your paycheck for premiums.