Your Tax Return: What Could Go Wrong?
According to the Internal Revenue Service (IRS), more than 140 million tax returns were filed in 2016. Many people filing those returns undoubtedly had at least a little anxiety, worrying about errors they might have made or audits they might face. According to the Texas Society of CPAs, the good news is there are remedies for some of the potential problems that could keep you up at night as the tax deadline looms.
What If You Make a Mistake?
Youíve filed your return. What a relief! Then, to your horror, you find income or a credit that you failed to include. When youíve made a mistake or omission on your taxes, you can fix the problem by filing an amended return. In some cases, no amendment may be necessary, such as when you make a math error or if you didnít send in a form related to information that is included on your return. The IRS will normally correct math errors and mail you a request for missing forms.
If you realize that you owe more tax than you reported because of an error or omission, you should pay the extra amount as soon as possible to avoid being charged penalties or interest. If you expect a refund but now believe you qualify for a larger one because of your error or omission, the IRS advises that you wait to receive your initial refund before filing your amended return. An amended return claiming a refund must generally be filed within three years of the date you filed your original return.
Hereís one omission that you have some time to fix: Did you forget to make all your contributions to a tax-advantaged Individual Retirement Account last year? Donít worry. In most cases, youíre eligible to make a contribution right up until tax filing day.
What If You File Your Return Late?
If you miss this yearís April deadline, or youíve failed to file in the past, your critical first step is to get your return in as soon as possible, even if you canít afford to pay some, or all, of your outstanding taxes immediately. The sooner you file and pay what you can, the less exposure you will have to interest and penalties.
If your tax bill remains unpaid, the IRS will begin collection efforts that could result in a levy on your wages or bank account, or a federal tax lien. You can help prevent those steps by filing your return and explaining your financial constraints to the IRS. The IRS has an installment agreement program and other programs designed to make it easier for those who canít pay their taxes immediately. If youíre owed a refund, youíll miss out on it if you donít file a return so, once again, itís in your interest to get your taxes done.
Consult Your Local CPA
There are some mistakes you may not even be aware of, such as missing out on deductions you could have taken. Thatís why itís so important to turn to your local CPA for advice on how to claim the right deductions and address all your compliance concerns. A CPA works with a wide variety of clients on their tax and other financial issues, so turn to him or her with all your financial questions. For more information on tax returns and more, visit 360finlit.org.
Copyright The American Institute of Certified Public Accountants.
| American Institute of Certified Public Accountants
||Texas State Board of Public Accountancy