What to Do If You Made a Mistake on Your Taxes

Do you have any idea how many tax returns are filed in the United States each year?

The answer, according to the IRS, over 140 million through May 2019 for the current tax year. Now, how many of them do you think were absolutely perfect and mistake-free?

The IRS doesn’t post that number, but they do publish a list of most common errors made, which makes it pretty clear that there are lots of people who are making mistakes. So what happens when it’s you that makes the mistake? What should you do?

Though politicians like to promise that filing our taxes is going to get easier to file, the truth is that they’re still pretty hard to figure out, and the 2018 tax year was particularly complicated. Plenty of tax professionals were left scratching their heads by details of the Tax Cuts and Jobs Act and its new approach to many allowances and deductions.  Those complexities don’t even get into the fact that math mistakes are so easy to make. When you put all of those factors together, it’s easy to see that tax return mistakes happen all the time. The mistake will definitely need to be addressed, but it isn’t the end of the world.

Where to Start When You Realize You’ve Made A Mistake On Your Tax Return

The first thing you need to do is stop panicking. We all have the April 15^th tax deadline ingrained in our minds, but the truth is that when it comes to fixing mistakes, the government provides a generous amount of leeway. In fact, when it comes to simple mistakes like math errors or forgetting to fill in a section, the IRS tends to fix mistakes for you and then just send you a letter alerting you to what they’ve done. There are many times that taxpayers will receive an ominous-looking letter in the mail with an IRS return address that is nothing more than a notification that they’ve found a simple mistake: if it didn’t make a change they likely just fixed it, and if it means you owe more money or need to provide more information, they’ll just tell you what to do to fix the problem. It’s always a good idea to respond to these notices as quickly as possible, especially if you owe more in taxes: though the tax agency understands that mistakes happen, that doesn’t mean that they are free and clear. If you owe money, you’re going to get charged penalties and interest on whatever you haven’t paid, so the faster you get your money in, the better for your wallet. Still, as long as you make your corrections within three years of the date that you originally filed your tax return — or two years from the date that you submitted the tax owed — you are within the IRS’s requirements. 

Of course, not every mistake is simple. When you or the IRS catches something more significant, like overstating or understating your income, you need to take the more substantial action of filing an amended return. This “do-over” gives you the opportunity to make things right, but you need to be very careful and make sure that you correct every mistake. Amended returns need to be filed for many different circumstances, including:

• Reporting too much or too little income
• Using the wrong filing status
• Not accounting for all of your dependents (or reporting somebody as a dependent incorrectly)
• Correcting mistakes on credits or deductions

Plenty of people make the error of only filing an amended return when they realize that they’ve overpaid the government. When you file an amended return, there’s a good chance that the whole thing is going to be gone over a lot more carefully, so make sure that you include every mistake that’s been made, including the ones that mean that you owe more.

If the old saying about “to err is human, to forgive divine” is to be believed, then I guess the IRS is pretty divine – they tend to be quite reasonable when it comes forgiving honest tax return mistakes, and have created lots of ways and plenty of time for taxpayers to address these issues. Still, would it be easier and less stressful to avoid both tax preparation and potential errors entirely? Unless you think it’s fun to try to make sense of our increasingly-complicated tax code and tax time away from your life to document your income, expenses, gains, and losses, using a tax professional for your return is a great way to eliminate your concerns about mistakes and give yourself back a lot of free time. Using a financial professional to prepare your taxes will not only minimize concerns about errors, but they also know all the ways you can potentially save on taxes and help you maximize your potential tax savings.