2018 tax horror stories

A common 'crypto tax horror story' involves those who received crypto as payment. They didn't know how to value it at the time of receipt for tax purposes. For example, if a freelancer was paid in Bitcoin, they might not have accounted for its market value on the day they received it. Later, when the tax authorities came knocking, they were in trouble. Additionally, in some regions, the tax laws regarding crypto are still unclear or changing. People who made transactions based on old or misinterpreted rules suddenly found themselves on the wrong side of the law when the authorities clarified the regulations.

There was a case where a taxpayer received a notice from the tax authorities saying they owed a large sum. They had used a tax software that had a glitch. It incorrectly calculated their deductions. They spent months trying to sort it out, dealing with piles of paperwork and numerous phone calls to the tax office.

One common theme could be tax miscalculation. People might have made mistakes in calculating their income or deductions, leading to wrong tax amounts.

I heard of a case where someone's tax preparer made a huge mistake. They misclassified a major expense, which made it seem like the taxpayer owed a lot more than they actually did. It took months of dealing with the IRS to get it sorted out. They had to hire an expensive tax lawyer to prove the error.

A woman had inherited a piece of land from her grandfather. She didn't realize that there were unpaid property taxes from many years ago. When she received notice of the tax sale, she was in the middle of trying to get a loan to build a house on it. The land was sold at the tax sale, and she lost not only the land but also her dream of building a home there. It was a very sad situation for her as she had sentimental value attached to that land.

One horror story is when a small business owner was audited. The auditor nitpicked every single expense. They questioned even the most legitimate costs like office supplies. The owner had to spend hours and hours gathering receipts and explanations. In the end, it took months to resolve, and the stress almost drove the owner to close the business.

Day trading tax horror stories often involve unexpected high tax bills. For example, some traders don't fully understand the short - term capital gains tax rate which can be quite high compared to long - term. If you make a lot of quick trades and have significant profits, the tax can eat into your earnings much more than you expected.

One horror story is about an expatriate who was working in a foreign country. Their tax situation was complicated as they had income sources from both their home country and the host country. The tax accountant they hired in the host country didn't fully understand the tax treaty between the two countries. So, the expatriate ended up being double - taxed on some of their income for a while until they found a more competent tax advisor to sort things out.

One common issue was miscalculation of deductions. People either over - or under - estimated what they could deduct, leading to problems with their returns.

A common day trading tax horror story is related to wash sales. Traders sometimes don't fully understand the wash - sale rule. For instance, if you sell a stock at a loss and then buy it back within 30 days, the loss can't be immediately claimed for tax purposes. Some traders do this unknowingly and calculate their taxes wrongly. Then, when the IRS discovers it during an audit, they have to pay back the wrongly - claimed deductions along with potential penalties and interest.