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By Ankur Bhardwaj
Published on 5 Jun 2024 6 min read
Due to the inherently complex nature of filing taxes in the U.S., it is common for small businesses to make mistakes on their forms. Usually, this is not as huge a problem as people perceive it to be, and there is nothing significant to panic about—unless the mistake was intentional.
If the IRS gets a whiff there might be some pattern, or they believe the error is deliberate, then they can initiated audits.
The IRS is considerate of taxpayers who make honest mistakes on their taxes and, hence, provides taxpayers with the option to amend their returns, with some conditions.
Amended U.S. Individual Income Tax Return, form 1040-X, is used when you need to amend your form 1040.
The IRS website instructs taxpayers to file an amendment form “if you reported certain items incorrectly on the original return, such as filing status, dependents, total income, deductions or credits.”
If you make a calculation mistake or forget to include other forms, such as W-2s or schedules, you will not have to file an amendment because the IRS will get with you for the same or fix the calculation mistake on your behalf.
In this article, we will discuss the steps to take if you file incorrect taxes. We will also share strategies and best practices to minimize the possibility of filing incorrect taxes.
What to Do if You File Taxes Incorrectly?
While it’s generally not a massive issue if you make a mistake in your taxes, the IRS expects you to make prompt changes and corrections to process your tax returns correctly as soon as possible.
Here are brief pointers that will help you navigate the situation effectively.
Stay Calm and Assess the Situation
The first step is to stay calm and review your tax return to identify the mistake. Understanding the nature and extent of the error is crucial. Panicking can lead to hasty decisions, which might complicate the situation further. Take a deep breath and give yourself time to review your return carefully.
Additionally, comparing your current return with previous years might be helpful if the mistake is not immediately apparent. This comparison can help pinpoint discrepancies.
Remember, errors are common and often fixable, so maintaining composure is your best approach to resolving the issue efficiently. For a comprehensive overview of various tax forms and how they are used, refer to our guide on IRS tax forms.
Check IRS Notices
Often, the IRS will catch calculation errors or missing forms, such as W-2s, and will send you a notice. If you’ve received such a notice, follow the instructions provided. The IRS typically includes clear steps on what you need to do next, making it easier to address the issue.
These notices will specify the nature of the error and the steps required to correct it. They may also include response deadlines, so acting promptly is essential. Ignoring these notices can lead to additional penalties or interest. If you need help understanding the notice, consider seeking help from a tax professional.
File Form 1040-X
If your mistake involves incorrect filing status, dependents, total income, deductions, or credits, you must file an amended return using Form 1040-X. This form allows you to correct the errors on your original return. It’s important to note that you can e-file Form 1040-X in some cases.
Make sure you fill out the form accurately and thoroughly. Include explanations for your changes and attach any forms or schedules affected by the amendment. The IRS website offers detailed instructions and examples to help you through the process.
Gather Supporting Documentation
Collect any necessary documents that support your amendment. This could include corrected W-2s, receipts for deductions, or other relevant forms. Comprehensive documentation will make your amendment more straightforward and increase the likelihood of a favorable outcome.
Organizing your documents systematically can also prevent future mistakes. Create a folder or digital archive where you keep all tax-related documents. This habit can save you time and stress when tax season arrives again.
Submit the Amended Return
Complete and submit Form 1040-X. Ensure you provide all required information and attach the necessary documentation. The IRS website offers detailed instructions on how to fill out and submit this form. Mail the completed form to the address listed in the instructions.
After submission, the IRS can take up to 16 weeks to process an amended return. Patience is critical during this period. Keep a copy of everything you submit for your records, and if you are still waiting to hear back within the expected timeframe, consider following up with the IRS.
Follow Up
After submitting the amended return, keep an eye on any correspondence from the IRS. They may request additional information or clarification. Responding promptly to such requests is essential to ensure timely amendment processing.
Following up also includes tracking the status of your amendment through the IRS’s “Where’s My Amended Return?” online tool. This tool provides updates on the progress of your return and can give you peace of mind while you wait for the final resolution.
Pay Any Additional Tax
If your amendment results in additional tax owed, pay it immediately to avoid interest and penalties. The IRS provides various payment options, including online payments and installment plans, to make this process easier.
Paying any additional tax promptly is crucial to avoid accruing further interest and penalties. If you cannot pay the total amount immediately, explore payment plans offered by the IRS. These plans can help you manage your financial obligations without undue stress.
How to Minimize Errors While Filing Taxes
Stay Organized
Maintain accurate and organized records throughout the year. Keep receipts, invoices, and financial statements well-organized to ensure you have all the necessary information when filing. This habit can significantly reduce the likelihood of errors and make the filing process smoother.
Using digital tools or apps for record-keeping can also enhance your organization. Update your records regularly and review them periodically to catch any discrepancies early. This proactive approach can save you from last-minute scrambles and potential mistakes.
Double-Check Your Work
Before submitting your tax return, double-check all entries for accuracy. Verify numbers, ensure all required forms are included, and review for any missed deductions or credits. Reviewing your work can catch simple mistakes that could lead to more significant problems down the line.
Having someone else review your return can also be beneficial. A second pair of eyes, whether a colleague, friend, or professional, can often spot errors you might overlook. This step adds an extra layer of assurance to your filingprocess.
Keep Up with Tax Law Changes
Tax laws change frequently. Stay informed about the latest tax rules and regulations affecting your filing. This can help you avoid mistakes related to outdated information. Subscribe to newsletters from reputable tax resources or follow the IRS’s updates to stay current.
Attending workshops or webinars on tax law changes can be beneficial, especially for business owners. Keeping abreast of these changes ensures compliance and the ability to take advantage of any new benefits or credits available.
Review IRS Guidance
The IRS provides extensive resources and guidance on its website. Utilize these resources to understand specific tax requirements and common mistakes to avoid. Reading IRS publications and FAQs can clarify complex issues and help you file more accurately.
Additionally, the IRS offers free assistance programs, such as the Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs. These services can provide personalized help, making the filing process less daunting and more accurate.
How doola Can Help You to Keep Your Tax Filings Error-free
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FAQs
What should I do if I realize I’ve made a mistake on my tax return?
Stay calm and assess the situation to understand the nature of the mistake. The IRS may correct it for you if it’s a minor calculation error. You may need to file an amended return using Form 1040-X for more significant errors.
How can I avoid making mistakes on my tax return in the future?
Stay organized throughout the year by keeping accurate records of all receipts, invoices, and financial statements. Double-check your work before submitting your tax return and stay informed about any changes in tax laws.
Can I e-file an amended tax return?
Yes, you can e-file Form 1040-X in some cases.
What happens if I ignore a notice from the IRS about a mistake on my tax return?
Ignoring IRS notices can result in additional penalties and interest. To address the issue and avoid further complications, it’s important to follow the instructions provided in the notice promptly.
How can doola help me with my tax filings?
doola offers a unique Tax Package that includes priority access to experienced CPAs who guide you through the tax filing process, ensuring you don’t miss out on any applicable rebates or deductions. Sign up for a free consultation to see how proper tax filings benefit your business.
