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What are the implications to file wrong Income Tax Return or Taxes?

What are the implications to file wrong Income Tax Return or Taxes?

Blog / compliance

What are the implications to file wrong Income Tax Return or Taxes?

 

When the tax season Comes, many people wants to complete their Income tax returns. Firstly, because they look forward to a possible refund. Secondly, because it is good practice to reduce your risk of identity theft by the taxpayer. But if you're in a hurry to fill out and file those forms, what happens if you file your taxes incorrectly?

You may have a brief moment of fear when you realize that you sent the Internal Revenue Service (IRS) wrong or incomplete information, but don't worry. Everyone makes mistakes, including the IRS. Therefore, the federal tax office has processes and forms in case this happens.

If you've filed your taxes incorrectly, you're not alone. We've found everything you need to know about what happens when you file your taxes incorrectly, from possible reasons you can take precautions to avoid this next time.

 

What are the implications if you make a Mistake on Your Tax Return?

Depending on the type of mistake, who finds it and how you handle the situation, a few things can happen when you file taxes incorrectly. Here are some things you might deal with

 

You Realize the Mistake Shortly After Filing

If you send off your tax return and notice that you’ve made a mistake, you can’t just refile another tax return and assume the IRS will know that it’s the right one. You need to follow the steps for fixing incorrectly filed taxes. That typically involves filing an amended return or sending a specific form in.

 

The IRS Finds Your Mistake When Processing Your Return

If the IRS finds something missing or thinks you made a mistake in your return, it will send you a notice. Typically, these notices let you know exactly which form you need to file to fix your mistake. They also give you a timeline, such as 20 to 30 days from the date you received the letter, to comply.

 

Getting any type of letter from the IRS can be scary, but don’t panic. The IRS sends hundreds of thousands of these letters out, and it just wants to see a response as soon as possible.

 

The Mistake Isn’t Found Immediately

If neither you nor the IRS finds the mistake, the tax return might be processed with the error in it. That could increase or reduce your refund incorrectly, depending on what type of mistake was made.

 

The mistake might be uncovered in the future during an IRS review or audit of records. You or your accountant (or CPA) might also find the error when conducting audits of your own files. In this case, you may owe interest on any amount that you should have paid but didn’t. You might also need to repay part of a refund that was incorrectly issued to you.

 

Since interest accrues from the original date the taxes were due, this can add up a bit. However, IRS interest charges are much less than charges due to failure to file or pay penalties. You should still file your taxes on time each year. It’s in your best interest to file accurately or correct any mistakes as soon as possible to avoid interest.

 

Steps for Resolving Taxes That Were Filed Wrong

How you resolve an incorrect filing depends on the mistake. If you receive a notice from the IRS about a potential mistake, follow the instructions in that document as soon as possible to resolve the issue. If you find an issue yourself, use the steps below to resolve it.

Make sure that it’s really a mistake or issue. Double-check your filing, or if you’re not sure whether there’s a problem, consider getting professional help from a tax filing service or CPA.

Determine whether the IRS already caught the issue. If your return has already been processed and you received a refund, double-check the amount. Did you receive more or less than you thought you would? If so, the IRS might have corrected your return for you based on W2 form and 1099 form information it receives about your income. You will likely receive a communication letting you know a change was made and why.

 If you do need to provide updated or additional information to the IRS, you’ll need to file a amend return through 1040-X Form. Even if you simply need to append another form to your tax return, you still have to file the amended return. This lets the IRS know that you’re sending new information and it should reprocess your return in light of that.

Plan to pay any new taxes you might owe as a result of the change as quickly as possible to avoid accruing interest.

Common Tax Mistakes People Make

Tax returns require a lot of numbers, math and reading. Getting all those details into the right columns takes work, even for pros. So, if you’re handling your tax return yourself, you could easily make a mistake. But it’s not something to feel bad about. Here are a few common tax return mistakes the IRS regularly sees.

 

  1. Arithmetic Mistake - It’s easy to miscarry a number or even miss one completely when you’re adding up rows and columns to get the answer for the next line on your tax return. If the IRS catches an arithmetic error, it’ll usually fix it and notify you of the result.
  2. Forgot 80 C to 8o U Deductions- This one can cause you to owe more taxes than you should. Unfortunately, the IRS isn’t under an obligation to find all your deductions for you, and it probably won’t let you know even if it does see the possible error. This is why it’s a good idea to use professional tax preparation software or work with a tax service so you get the largest refund you can.
  3. Non Disclosure of Total Income - Whether you forgot about a W2 or got a 1099 in the mail after filing your taxes, this is one you should fix as soon as possible. Even if the income won’t change how much taxes you owe, it needs to be accounted for on your tax return.
  4. Cheat on taxes - You can’t mislead the numbers to get more deductions or hide income. That’s illegal, and this is the one time a tax mistake can come with consequences that go beyond a little hassle and a bit more expense. If you’re found lying on your taxes to evade paying them, you could be charged criminally.

 

Tips for Minimizing Mistakes Come Tax Season

Sure, filing your taxes wrong can be an honest mistake. And you definitely don’t need to freak out about it. But that doesn’t mean you should take a laid-back approach to taxes either. Follow these tips for minimizing the chances that you’ll make careless errors during tax season.

Keep up with your finances throughout the year. Keeping receipts, payments and income forms organized all year reduces how much work you have to do during tax season. It also cuts down on the chance that you’ll lose or leave out important information.

Use a professional service or software. Pay for an experienced pro to file your taxes to help ensure you cover all possible data and get the most in deductions. Many of these services will also file a free amended return if any mistakes were their fault.

Wait to file until you have all the information. An early refund is great, but avoids filing before you have all your information. The Government gives extension to file Income Tax return so Note that filing an extension does not extend your obligation to pay whatever taxes you might owe in due date.

Keeping up with your taxes can help you avoid a situation that could derail your entire financial life. But you don’t have rushing into filing to keep your identity and credit history safe. Instead, keep an eye on your credit report via our free credit report card all year to understand what’s going on with your score and identify potential fraud early on. Then, you’re free to file your taxes at a time that’s most appropriate for you and helps cut down on possible mistakes.