IRS Tax Advice: Come Clean!

income tax monopoly dice debtIf one fact about life in America is indisputable, it is that the U.S. tax code can be complex and confusing. But for those people who realized — while shoving their W-2 form away in a rarely-opened drawer — they had made an error in their tax return, the Internal Revenue Service has a solution. As MarketWatch reported Tuesday, experts advise taxpayers to come clean to the IRS about the mistakes as soon as possible.

While not all errors require filing an amended return, according to the IRS, the agency has a form for just such an occasion, the 1040X.

People who discover that they got their math wrong or forgot to attach a form should not rush to amend their returns because the IRS has mechanisms in place to catch those kinds of mistakes. In that case, the IRS will send the mistaken taxpayer a letter explaining the errors. The key is there is already a process for handling that, says Eric Smith, a spokesman for the IRS, and you dont need to go through the extra trouble of filing an amended return.

EXCLUSIVE OFFER! Take Advantage of the Tax Relief 50% Off Sale for a Limited Time. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

Senior technical manager for the American Institute of Certified Public Accountants, Benson Goldstein, told the publication that those taxpayers who misreported their income, or made any other mistakes that could change how much they owe should file an amended return. This category includes people who forgot to attach a 1099 form, or needed to change their filing status, deductions, or credits. Because the IRS has software that allows the agency to uncover unreported income, taxpayers who forget to include all 1099s could be flagged for an audit…

But filing an amended tax return can also be beneficial. Many taxpayers realize they failed to claim a deduction that they did not know they qualified to receive. However, many also claimed a credit or a deduction for which they were not actually eligible.

In general, the majority of taxpayers file amended returns in an attempt to receive a bigger refund, Goldstein noted.

The IRS has advice for taxpayers who believe they are due a larger refund: wait until the first refund check is received before filing an amended return. But, if the IRS does not accept this amended return, taxpayers should expect to pay interest and penalty charges, the agency said.

EXCLUSIVE OFFER! Take Advantage of the Tax Relief 50% Off Sale for a Limited Time. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

While some people may count on the possibility that the IRS will never catch their glaring math errors, Goldstein said it is a better strategy to come clean; the IRS has three years to collect back taxes, and longer if the agency suspects that fraud was involved. You want to show there was no malicious intent, he told the publication.

Don’t Miss: How Do We Kill Too Big to Fail?

More Articles About:   , ,  

More from The Cheat Sheet