Ways to Upset
the IRS Folks
1. Making math blunders
Far and away, says the IRS, the most common mistake on tax returns is bad math. Numbers
are transposed, left out or totaled incorrectly. And since a total figured on one tax form
or work sheet often is transferred to another form (or forms), that one simple mistake
could quickly compound into a very costly miscalculation.
Even if you use tax software, you're not off the hook. Sure, the computer program will do
the figuring for you, but if you put the wrong numbers in to begin with, the machine won't
catch that. So double-check your entries, whether on paper or on your PC.
2. Entering wrong ID numbers
These nine-digit identifiers are crucial to tax forms. Write your Social Security number
correctly and clearly on each page of your tax return. If you're married and filing
jointly, be sure that your spouse's Social Security number is entered correctly, too.
Don't forget about your dependents, be they your children or an older relative for whom
you're financially responsible. An incorrect Social Security number in any of these cases
could delay your refund or cause the IRS to nullify some credits you might claim.
Your Social Security number also shows up on various income documents, from your W-2 form
to investment and savings account statements to retirement plan contribution reports -
and the IRS gets copies of all of these. Tax examiners will be looking at each of these
documents closely, both the amounts earned and the taxpayer's ID number.
3. Ignoring IRS material
More than 73 million people filed electronically this year. But almost 63 million others
sent in paper forms. If you still fill out your return by hand, use the label preprinted
with your name and address along with the envelope that comes with your tax packet to send
in your form.
Your address label will help IRS employees more easily read your personal information.
Even if it's not correct because, for example, you moved, use it and simply cross out the
wrong information and correct it by hand.
The envelopes, or in some instances, labels printed with the IRS delivery information, are
color-coded to notify tax processors whether you're getting a refund or are sending in a
check. By using the appropriate envelope or label, your 1040 will get to the correct
office sooner, meaning you'll get your refund more quickly.
Similarly, the pre-addressed envelope or label will ensure that your return goes to the
proper processing site. The IRS has reorganized its service center operations in recent
years, so it's possible your return could be handled at a different location than it was
last year. The envelope or label has the correct delivery data.
4. Picking the wrong 1040 form
There are three types of 1040 forms, and tax experts, including those at the IRS, suggest
taxpayers use the simplest one possible that meets your tax needs. But make sure that it
does indeed get you the best tax result.
In some cases, the long Form 1040 is the best move, even if your tax life is not that
complicated. You don't have to fill out every line on the two-page form, just the ones
that apply to you. And since it offers several more ways to cut taxes than are found on
the slightly shorter 1040A or shortest 1040EZ, it could really pay off.
So take a few extra minutes to look over all three forms and determine which one best
suits your tax situation.
5. Omitting some forms
Again, this is a problem primarily for paper filers. These taxpayers need to be sure they
include their W-2 forms (Copy B) to avoid delays in processing their returns.
If you received a Form 1099-R that reports federal income tax withheld, Copy B of that
form needs to go into the envelope, too.
And if you have several additional forms, don't forget those either. That extra paperwork
you worked through to gain a tax credit or deduction won't do you any good if it doesn't
make it to the IRS. The IRS also recommends that you put the forms in proper order behind
your 1040. Each one has an attachment sequence number in the upper right corner, just
beneath the year notation.
6. Overlooking unearned income
Thanks to your Social Security number on financial accounts, the IRS knows exactly how
much you make in interest and dividend income each year. The tax agency gets copies of
your Form 1099 earnings each tax season, and they will use the documents to double-check
your filing information.
So be sure to collect all those earnings statements and put the total taxable amount on
your return. If you don't, IRS return examiners will let you know what you forgot, usually
along with an added bill for penalty and interest charges that accrued because of your
interest and dividend filing oversight.
7. Using the wrong tax table
It's easy to make a mistake reading the tax tables found in the tax return instruction
booklets. The print is small, and there's a lot of data crammed on the pages. Make sure
you use the correct column for your filing status.
Using any tax table could be an even costlier mistake for some filers. If you have
long-term capital gains income, you'll need to do some additional figuring to ensure you
don't overpay your taxes, since the tax rate on this money is usually much lower than
regular income tax rates.
8. Fumbling payment procedures
If you write a check for any taxes you owe, be sure you sign it, include your Social
Security number on it and make it payable to the U.S. Treasury, not the IRS.
Don't staple the payment to your form; simply include it in the envelope. IRS examiners
want to get payments into the government account as quickly as possible, even before they
check the accuracy of returns. If they have to pull the check off your form, some other
documents (for example, your W-2) that are necessary to complete the processing could be
separated and lost.
Be just as careful if you're getting, instead of making, a tax payment. If you have your
refund directly deposited, make sure that you correctly enter your financial institution's
routing number and your account number on your return. Wrong numbers can cause your refund
to be delayed or misdirected.
9. Forgetting to sign the return
It's the last thing you must do when filing, but many taxpayers who send in paper 1040s
forget to sign the form. The oversight could be quite costly. The IRS won't process a tax
return that lacks a signature.
If you make this mistake in February, you still have plenty of time for the IRS to notify
you and then refile a signed form. But if you forget to sign a return you mail just before
the April deadline, by the time you correct the oversight, you'll be in late-filing
territory, which carries an automatic penalty.
10. Missing the deadline
You wouldn't think that people could overlook April 15, but it does happen. Maybe time
just got away from you or an emergency arose that prevented you from filing on time.
Regardless, the result is the same: If you owe the government and don't pay by the
deadline, you'll end up owing additional money. The IRS imposes both failure-to-file and
failure-to-pay penalties. The total late-filing penalty is usually 4.5 percent of the tax
you owe for each month, or part of a month, that your return is late; this accrues for up
to five months. If your return is over 60 days late, the minimum penalty for late-filing
is the smaller of $100 or 100 percent of the tax owed. And remember, you'll also owe interest on the unpaid amount.
Back to the "Top 10 Lists" Main Page
|
