Mistakes happen — even when it comes to tax returns. But very often, errors aren’t caught until after your return is submitted to the IRS.
To avoid raising any red flags, it’s important to know what to look for and how to right any wrongs.
What not to do
Here are the three most common mistakes that taxpayers make:
- Not reporting all your income. No matter how much or little you make, report it all. Unless you run a strictly cash business (which may also raise suspicion), the IRS knows exactly what you’re bringing in. Copies of every W2, 1099 or other forms you receive are sent to the IRS to ensure that your numbers match theirs.
- Overstating business expenses. If you’re a business owner, you’ll most likely have legitimate deductions. But don’t try to claim deductions that are way outside the norm. Consult with your tax professional and stay current with tax laws, so you’re not padding your tax return with write-offs that are shaky at best.
- Bad math. If things don’t add up — even an honest mistake inputting numbers — the IRS will catch it. Make sure to double check your returns and have a qualified tax professional assist you. A math error won’t necessarily get you an audit, but it might get you some unwanted attention.
Filing an amended return
Luckily, the IRS routinely processes a significant number of amended returns each year.
Individual income tax returns may be amended up to three years after the due date of the original return by filing an IRS Form 1040X. Even if you always e-file, a 1040X must be filed physically as a paper form. Keep in mind:
- A separate 1040X is required for every year that you’re correcting. Be sure to mail each form in its own envelope.
- On the back of the form, explain the changes you’ve made and reasons for making them.
- Schedules, forms or any other documentation that’s affected by your changes should also be mailed in.
- If the corrections made to your federal form affect your state taxes, send in a corrected return for that as well.
Save yourself the trouble, literally
The longer you wait to fix a mistake, the more it will potentially cost you. One small misstep could leave you on the hook for significant interest and penalties. The CPAs at NJ accounting firm Magone & Company can help keep you in good standing with the IRS. To schedule a no-obligation confidential consultation, give us a call today at (973) 301-2300.