Saturday, July 2, 2011

But when you screw up your taxes …

Back on June 23, I gave you a link on what to do if the IRS makes a goof and sends you a nice fat check by mistake. And if you read it, you found out how holding onto their money can cause you a heap of trouble.

But suppose you’re the one who make the error on your 1040? What then?

Well, that can get you in deep dodo, too, especially if you ignore the problem.

So the question is: After you find out you’ve made a mistake should you file an amended return or just hope the IRS doesn’t catch it? Well, don’t count on the government missing your mistake. With computers crosschecking everything such as 1099s and W2s, you don’t stand a chance.

And if you don’t take care of the problem?

There's a penalty for each month the tax remains unpaid. There can also be more penalties for big understatements or underpayments of estimated income tax.

The good news is that the IRS may waive a penalty if you can prove there was a reasonable cause for the error, and that it wasn't willful neglect.

In preparing an amended return, be thorough. The more information you provide to the IRS about the corrected item, the less chance there is that Geithner’s gang will do an audit.

Five Common Mistakes

According to the IRS, taxpayers often make these mistakes:

• Errors in adding and subtracting
• Forgetting to include interest and dividends
• Dependent Social Security number not correct
• Incorrect filing status
• Using the incorrect tax table

How to Avoid Making Them …

The IRS offers some ways to avoid common tax return errors:

File electronically

Filing electronically, whether through e-file or IRS Free File, vastly reduces the errors in a tax return, as the tax software does the calculations, flags common errors and prompts the taxpayers for missing information.

Mail a paper return
to the right address

Paper filers should check the appropriate address where to file in or their form instructions to avoid delays in processing. Fill in all requested information clearly, including Social Security numbers.

Check only one
filing status

Also, check the appropriate exemption boxes. When you enter Social Security numbers, make sure they are correct.

Double check all figures

While software catches can prevent many errors on e-file returns, math errors remain common on paper returns.

Get the right routing
and account numbers

Requesting a federal refund directly deposited into one, two or even three accounts is convenient and allows the taxpayer access to his or her money faster. Make sure the financial institution routing and account numbers entered on the return are accurate. Incorrect numbers can cause a refund to be delayed or deposited into the wrong account.

Sign and date the return

If you are filing a joint return, both you and your spouse must sign and date the return. E-filers can sign using a self-selected personal identification number (PIN).

Attach forms to the
front of the return

Paper filers need to attach W-2s and other forms that reflect tax withholding, as well as other necessary forms and schedules, to the front of their returns. Those claiming credits that require special documentation, such as the Homebuyers Credit or the Adoption Credit, are also reminded to include all the suitable records with their returns.

And a Couple of Tips from Me …

If you haven’t requested an
extension yet … do it now!

You had until April 18 to file an extension, which will let you put off filing until October 17. If you didn’t meet that deadline, requesting a filing extension for your return is easy and could still prevent late filing penalties. You can either use Free File or Form 4868. But keep in mind that while an extension will grant you additional time to file, you were still required to pay any taxes owed by April 18.

Do you owe tax?

If so, don’t wait another day to pay it. A number of e-payment options are available. Or send a check or money order payable to the “United States Treasury.”

Have a Safe and Happy Fourth of July!


No comments:

Post a Comment