Submitting your return and putting another year of taxes behind you usually feels pretty good and offers some peace of mind. You’re all done and can move on to other matters! Then again, you might end up realizing that your tax return had an error. What are the next steps?
When You Owe Additional Taxes
Probably no surprise here—if you find out that you owe more taxes than you initially thought, you’ll need to go ahead and amend your tax return. It’s a legal requirement. So while it’s inconvenient, it’s crucial to follow through.
Missing information on either your W-2 or a Form 1099 are especially important. That’s because other parties reporting to the IRS will often reveal the error on their own. In that case, you might be facing penalties and interest, in addition to the higher tax obligation. You can avoid those risks by amending your return as soon as possible.
When the Tax Liability Should Be Lower
Errors that miscalculated your tax refund by a significant amount should usually be addressed right away. After all, why wouldn’t you want to get the money you’re owed? For those instances, definitely file a tax amendment. However, if the error doesn’t seem that substantial, you may want to think twice.
Amended returns will usually face extra scrutiny than a regular tax return. Moreover, if the error is minor, it could lead to more trouble than it’s worth. Even though you may be owed money, you’d want to factor in the time it takes to work through an amendment, plus any stress that may entail. And if making one adjustment means you’d need to go back and correct other years too, that just compounds the issue.
There are also differences between your federal taxes and your state taxes to consider. Although you may notice that your return should be higher on your federal return, making that amendment could initiate other updates for your state return. Again, you’ll want to run the numbers and understand the tax code on the local level.
You need to ensure the tax amendment would actually work in your favor in the grand scheme of things. Nevertheless, when you find an error that appears to increase your refund—and whether you move forward or not—you should always retain that documentation. You’ll need it on hand in case of an audit.
Need Help Taking a Closer Look?
Tax return errors that are in favor of the IRS need to be addressed promptly and accurately. That’s where a good CPA firm can help! If you need an accountant or tax professional to work with you through that process, know that NSO and Company is here for you.
Our team can also work with you to figure out the best course of action when the logistics of making an amendment in your own favor aren’t quite so clear. Let our experience guide you down the right path. You can give us a call at (317) 588-3131 to get those questions answered. We’d be happy to help!