What to Do If You Make a Mistake on Your Tax Return
Contents
- 1 What to Do If You Make a Mistake on Your Tax Return
- 2 Why Correcting Mistakes Matters
- 3 Types of Tax Return Mistakes
- 4 Calculation Errors
- 5 Missing Information
- 6 Incorrect Filing Status
- 7 Dependent Issues
- 8 How to Correct a Tax Return Mistake
- 9 If You Haven’t Filed Yet
- 10 If You’ve Filed, But the IRS Hasn’t Processed It
- 11 If the IRS Has Already Processed Your Original Return
- 12 When to Amend vs. When Not To
- 13 Potential Consequences of Not Amending
What to Do If You Make a Mistake on Your Tax Return
So, you filed your tax return – but now you realize there’s a mistake. Don’t panic, it happens. Tax laws are complex, and even the most diligent taxpayers can make errors. But, take a deep breath – there are steps you can take to fix it.
Why Correcting Mistakes Matters
You might think, “It’s just a small mistake, no big deal.” But even minor errors can have major consequences. Underreporting income or overclaiming deductions can lead to penalties, interest charges, and even potential criminal liability for tax evasion in extreme cases.On the flip side, if you underpaid taxes due to an error, fixing it promptly can minimize interest and penalties. And if you’re owed a larger refund, well, who doesn’t want their full refund?The key is addressing mistakes proactively. Ignoring errors won‘t make them go away – and can actually make the situation worse over time.
Types of Tax Return Mistakes
Tax return mistakes generally fall into a few categories:
Calculation Errors
Simple math mistakes happen, whether it’s a decimal point in the wrong place or just sloppy addition. These types of errors are usually easy to fix.
Missing Information
Maybe you forgot to report some income from a side gig or investment. Or you may have missed out on a valuable tax credit or deduction you qualified for. Leaving out key details can significantly impact your tax liability.
Incorrect Filing Status
Your filing status (single, married filing jointly, etc.) determines your standard deduction amount, eligibility for certain credits, and tax brackets. Filing under the wrong status means your entire return could be incorrect.
Dependent Issues
Claiming dependents when you don’t meet the requirements, or failing to claim a qualified dependent, can lead to errors on your return. The rules around dependents can be tricky.No matter the type of mistake, the IRS has processes in place for you to correct your return. The sooner you act, the better.
How to Correct a Tax Return Mistake
The method for fixing your mistake depends on whether you’ve already filed your original return and if the IRS has finished processing it yet. Let’s break it down:
If You Haven’t Filed Yet
If you catch the mistake before filing, lucky you! The solution is simple – just file an accurate, amended return. No need to file an original with errors first.
If You’ve Filed, But the IRS Hasn’t Processed It
In this case, you can simply file a second, corrected original return. The IRS will process the second return with the accurate information. Just don’t file an amended return yet, as the original hasn’t been fully processed.
If the IRS Has Already Processed Your Original Return
Now we’re getting into amended return territory. You‘ll need to file IRS Form 1040-X, the Amended U.S. Individual Income Tax Return. This form allows you to correct your original return by:
- Providing the correct information
- Explaining why you’re amending
- Attaching any supporting documentation
The 1040-X is fairly straightforward, but be sure to follow the instructions carefully. You‘ll need to file a separate 1040-X for each tax year you’re amending.There are some additional wrinkles depending on your situation:
- You Owe More Tax: Pay the additional amount when filing the 1040-X to minimize interest and penalties.
- You’re Owed a Refund: The IRS will process it after receiving your amended return. Just don’t amend to claim additional refunds from more than 3 years ago – the IRS has a 3-year statute of limitations on issuing refunds.
- You Missed the Filing Deadline: You can still file an original late return, but you may face late filing penalties. Filing an amended return won’t remove those penalties.
- You Agreed to an IRS Adjustment: If the IRS already corrected your return based on information they received, you likely don’t need to amend unless you have additional changes.
The IRS recommends filing amended returns as soon as possible after discovering an error. But you have up to 3 years from the original filing due date to submit a 1040-X and claim a refund.
When to Amend vs. When Not To
Not every mistake requires filing an amended return. The IRS may actually catch and correct some errors during processing, like simple math mistakes.You generally don’t need to amend for these types of “math error” situations, as long as the correction is accurate. The IRS will just adjust your return for you.However, if the IRS correction is wrong, or you have additional changes, then you should amend your return using Form 1040-X.As a rule of thumb, you‘ll want to amend if:
- You need to correct your filing status
- You forgot to report some income
- You have additional deductions or credits to claim
- You need to add or remove dependents
Basically, if the change could significantly impact your taxable income, deductions, credits, or overall tax liability, it‘s worth taking the time to amend properly.
Potential Consequences of Not Amending
So what happens if you just ignore that mistake on your return? Well, it could come back to bite you. Potential consequences include:
- Delayed Refund: If you’re owed a larger refund, the IRS won’t release it until you fix the error and file an accurate amended return.
- IRS Correction and Penalties: The IRS may eventually identify the mistake themselves. At that point, they’ll correct your return, plus hit you with penalties and interest charges.
- Audits and Bigger Penalties: Unfiled or inaccurate returns increase your chances of an IRS audit down the road. If they find errors, you could face larger penalties of 20% or more of the unpaid tax.
- Criminal Charges: In extreme cases of blatant tax evasion or fraud, you could even face criminal charges. While honest mistakes don’t constitute fraud, willfully ignoring errors can be viewed as attempted tax evasion.
The bottom line? It’s almost always better to be proactive about correcting legitimate mistakes. Amending your return is cheaper and easier than dealing with IRS enforcement actions after the fact.