Tax Debt Help – Made a mistake? Form 1040X can save the day!
This is another great article from “Don’t Mess With Taxes” blogsite and certainly worth restating for the coming tax filing year………………….
Uh-oh! You were slipping that W-2 copy into the drawer when it caught your eye.
How could you have missed that when you did your final filing review and dropped your return in the mail? What can you do about it now?
As it turns out, plenty.
The complexity of the tax code, coupled with the frantic lives most of us lead, means that there is ample opportunity for tax-filing mistakes. Sometimes the mistakes could cost you, like forgetting to include income earned on an investment account. Other times it might lower your tax bill, such as when you run across a forgotten receipt for a generous charitable contribution you made.
Either way, the Internal Revenue Service provides second chances to get your tax return right with Form 1040X.
This X-file is normal
There’s nothing supernatural about this X-file.
For a tax form, the 1040X is pretty easy to complete. Basically, the IRS wants to know what you originally reported, what your corrected numbers are and why you are making the changes.
There’s also a section for adding or subtracting personal exemptions in case there was some confusion as to whether you properly counted someone as a dependent.
And, in most cases, you can change your filing status, which could get you a bigger refund. For example, a new divorcee filed this year as a single taxpayer. But that cost her some tax money because she’s got custody of the kids. She should have filed as a head of household, which would have provided her with a larger standard deduction.
These are the kind of things you most definitely should correct with a 1040X, say tax experts.
When the IRS benefits
Taxpayers also should be diligent about correcting their returns even if it means they end up paying a bit more in taxes.
Why? Because it’s a pretty safe bet that the IRS is going to discover your error eventually.
If it’s a simple addition or subtraction mistake, there’s no need to amend the return. The IRS says its computers will detect the error, notify you and adjust your return automatically.
But if it’s something bigger — you overlooked a Form 1099 for $1,500 you got from a freelance house painting job — and you catch and correct it first, it could save you from paying even more to the IRS.
The IRS may not penalize you for this honest mistake, but it sure will collect some interest on the proper amount you didn’t pay on time in the first place. The sooner you correct the error, the less interest you’ll face.
“We had one preparer who filed a client’s return,” explains Brenda Schafer, senior tax research coordinator for H&R Block, “and then the employer informed the person that he would be getting a corrected W-2, so it had to be re-filed.
“You just want to be sure you have a correct return,” she says, “whether it’s in your favor or not.”
Year-round amended filing season
Such corrections are a year-round occurrence, but tax professionals say the need to amend a return often is discovered during the following year’s filing season.
“Sometimes when you’re having next year’s return prepared,” notes Schafer, “the professional says, ‘Oh, you didn’t tell me about that last time.’”
Then there’s the case where a little more knowledge can mean more tax filing work.
“We’ve had people take income tax courses to help them do their own returns and pick up items where they could or should amend a return,” Schafer says.
Amending time limits
But don’t go searching through old files for ancient tax returns in the hopes of possibly eking out a few more refund dollars.
The IRS generally gives taxpayers three years after the original return’s filing date to make any changes with a Form 1040X. If you filed early, you get three years from the return’s due date to correct any errors.
Your window to amend closes a bit if you didn’t pay all the tax you owed when you filed. In this case, you must revise your return within two years of the day that you finally paid your full bill to Uncle Sam. If, however, the two-years-since-payment date arrives after the standard three-year time limit, the IRS says you can amend your return using the deadline that comes later. Similarly, if you paid your taxes late, but not that late, and the three-year grace period provides you more revision time, you can use it.
And don’t automatically reject filing an amended return out of fear of inviting an IRS audit. Sure, the IRS will take a close look at an amended return that’s netting you a refund. And that means tax agents could conceivably look at your original tax paperwork in the process.
So why, ask hesitant amended filers, should they invite the extra attention, especially if they file just within the three-year amendment limit — the same time period after which the original 1040 would be off the tax examination radar?
“An amended return might just draw attention to a return,” acknowledges Schafer. “But, really, people shouldn’t be concerned. The main thing with tax filing is to get it right.”
And that means getting it right any time.
S. Raines, Sr. Financial Advisor/Tax Preparer
Tax Debt Help – “The Top 5 of the Dirty Dozen List of Mistakes”
After receiving the November, 2007 issue of the FEDERAL TAX ALERT from the National Society of Tax Professionals and reading this article, I felt that I really needed to pass this information along. And trust me, it is the most valuable information that you can receive for the 2008 tax season or for any tax year.
Checkout “Ten Ways To Annoy An IRS Agent” first.
http://www.youtube.com/watch?v=5NkG2Ho39iU
“The IRS announces each year what they are going to be looking for in their annual “Dirty Dozen” report. They also make the audit statistics available in order to see that they are auditing taxpayer’s returns.
The following are the top five red flags for audits. They include:
Location. Where you live makes a difference in determining whether you are more at risk from an audit. You are more likely to get an audit if you live in one of these places:
Los Angeles, North Central District (ND, SD, MN), Southern California, Northern California, Manhattan, Central California, Brooklyn, Southwest (AZ, NV, NM), South Florida and Houston.
How Much You Make. This statistic is fascinating. It would seem to make sense that the IRS is more likely to audit people who make more money. But, the fact is that they are actually more likely to audit people who make LESS money. In fact, the most likely return to be audited is a return that includes a business that makes less than $25,000 per year. If you do not have a business, you have the most chance for an audit if you file a Form 1040A and make less than $25,000 per year. Business Entities. If you have a business, you are much more likely to be audited if you operate in a Sole proprietorship, Schedule C. In fact, you are ten times more likely to be audited as a Sole Proprietorship than if you are an S Corporation or C Corporation. Why? That is because most Sole Proprietorships do not have great recordkeeping systems and the IRS knows that.Under-reporting Income. the IRS receives copies of your K-1s form Limited Partnerships and S Corporation, 1099s from interest, dividends and sales, and W-2s. If you do not report these items on your return, or you report a different amount, your return will get pulled for inquiry.Who Files Your Return Matters. If you have a complex return and prepared it yourself or if your return was prepared by someone on the IRS’s problem preparer list, you are more likely to be audited.”The most important advice that you need to remember is “once you have been audited, then you cannot go back and amend a return for changes”. Once the audit has taken place you will have to live with the IRS’s decision and finding. And once that happens, most folks find themselves having to solicit the help of Tax Resolution services such as Effectur, Inc to help with audit representation and negotation of payments. “What is the difference between a taxidermist and a tax auditor?” The taxidermist takes only your skin!”…………
S. Raines, Sr. Financial Advisor/Tax Preparer
My StumbleUpon Page
