It is easy to make errors and omissions when preparing tax returns. These mistakes could be as simple as not entering the items on the correct line. But it could also be as serious as a significant discrepancy found by the IRS in your tax declaration.
In this article, we’ll help you develop best practices to avoid tax return mistakes and discuss their consequences. In addition, we’ll also offer online faxing as the best solution to produce an error-free tax return.
What Is an Incorrect Tax Return?
An incorrect tax return refers to a tax return that contains errors, omissions, or misrepresentations. These errors can be unintentional, such as mathematical mistakes. It could also be intentional, such as purposefully understating income or over-claiming deductions to reduce tax liability.
Examples of incorrect tax returns include:
- Mathematical errors: Failing to add up figures correctly or incorrectly transferring information from one form to another.
- Failure to report income: Not reporting all income received in a tax year, like self-employment or rental income, can result in tax return errors.
- Incorrect deductions: An inaccurate tax return may result from claiming deductions that are not permitted or go beyond the allowed limits.
- Filing under the wrong status: Another one is choosing the wrong filing status, such as registering as “single” instead of “married filing jointly.”
- Failing to include required forms: Failing to include all necessary forms, such as W-2s or 1099s, can result in an incomplete tax return.
- Incorrect Social Security Numbers: Entering an incorrect Social Security number can delay the processing of a tax return or result in incorrect tax calculations.
- Incorrect Deductions and Credits: Claiming deductions or credits that are not allowed or that exceed the allowable limits.
- Forgetting to Sign the Tax Return: When signing a tax return on paper, one common mistake is forgetting to sign the form.
The Importance of Accurate Tax Returns
Accurate tax returns are crucial for individuals and businesses in all industries for several reasons, including:
- Compliance with Tax Laws. Filing accurate tax returns ensures federal, state, and local tax laws compliance. Failure to comply with tax laws can result in hefty penalties, fines, and future legal disputes.
- Avoiding Audits. Filing an inaccurate tax return may increase the chances of an audit by the IRS or other tax authorities. An audit can be costly, and time-consuming, and can lead to additional penalties and interest charges.
- Maximizing Deductions. Filing accurate tax returns can help individuals and businesses maximize deductions and credits, reducing tax liabilities. This can help businesses reinvest more in their operations and increase profitability.
- Maintaining Good Standing. Accurately reporting income and paying the correct taxes helps companies to maintain a good reputation with customers, suppliers, and investors. It also ensures that the business is in good standing with tax authorities.
- Facilitating Financial Planning. Accurate tax returns provide a clear picture of a business’s financial situation, which is essential for financial planning and decision-making. This information can be used to develop budgets, forecast cash flow, and make strategic decisions about future investments and growth.
- Meeting Lending Requirements. Financial institutions may require accurate tax returns to assess a business’s creditworthiness when considering loan applications or lines of credit. Failure to file accurate tax returns can jeopardize a business’s ability to obtain financing.
The Consequences of Filing an Incorrect Tax Return
If you filed an incorrect tax return, whether intentionally or unintentionally, it can lead to the following unwanted scenarios:
You may owe the IRS money.
If you don’t report all your income or you miscalculate your deductions, you may end up owing the IRS money. This can be problematic if you’ve already spent it or if you don’t have the funds to cover the bill. When you’re filing your taxes, it’s important to make sure that everything is calculated correctly and in all honesty.
The IRS can take legal action to collect the money, such as filing a lien against your property. If the debt is large enough, the IRS may even seize your assets to cover the amount owed. Additionally, the IRS may charge you interest and penalties, which can significantly increase the amount of money you owe.
You may end up being audited.
Filing inaccurate taxes can increase your chances of being audited by the IRS. An audit is an intensive examination of your tax returns and can take time and effort. The IRS may accuse you of filing erroneous information or evading taxes, which could result in a stressful court battle.
You could be subject to fines and penalties.
In addition to owing money, filing incorrect taxes can result in hefty fines and penalties. You may also be charged interest and late fees for any overdue payments. Furthermore, if the IRS determines that your errors were fraudulent, you may be subject to criminal charges. The worst-case scenario would be a prison sentence.
Your refund could be delayed.
If you’ve made any errors on your tax return, you may have to wait a while before your refund is processed. The IRS will have to review your return to determine any discrepancies. This can take time, and any delays could mean waiting to get your refund. The IRS may reduce your refund if they find that you owe them money.
You may have to file an amended return.
If you need to make corrections to your tax return, the IRS may require you to file an amended copy. This is considered a second or revised version of your original return. It’s used to fix any errors or make any necessary changes. Filing an amended tax return is often tedious, but it’s better than dealing with it later and risking legal action.
Tips for Avoiding Errors on Your Tax Return
Save yourself from the hassle of being involved in an incorrect tax return and follow these tips below:
Don’t Take the Basics for Granted
And when we say the basics, it’s your personal information. Sometimes you could get carried away that you’d even misspell your own name out of sheer confidence. In essence, double-check all your personal information before submitting your tax return to the IRS.
Get the Data Right
Mathematical errors are the most common mistakes taxpayers make when filing their tax returns incorrectly. In fact, even before they do the adding, subtracting, or dividing, they may already be committing a miscalculation.
That is to say, people have the tendency to round up numbers in the presence of decimal points. Get the data right and provide exactly what’s on your tax form.
Include All the Income You Earned
Everything. In addition to your paycheck from your regular office job, report the income you earned from a side hustle. This is regardless if you didn’t receive a 1099 form for the money you earned. Doing so will prevent any discrepancies and disputes that may arise against you in court.
File Your Tax Returns ASAP
Don’t be a procrastinator who will only file his tax returns at the last minute. It’s doubtless a hassle dealing with taxes. But it would be exhausting if you find yourself entangled in a tax-related legal case. So if you’re still thinking of delaying your tax filing, think of the many and grave consequences.
Consider Using Tax Software
The IRS said what they said: taxpayers are prone to errors if they do their tax returns on paper. With this, you can make filing your tax return error-free with the help of tax software or a paperless solution. If you’re traditionally doing it by mail, it’s high time to shift online to accomplish your tax obligations.
One such online solution to streamline your tax returns is iFax. It is an online faxing platform used and trusted by industry professionals in sending and receiving their faxes online. When you file your tax return, you can use iFax to ensure that your tax forms are accurate and error-free.
Filing Your Tax Return Online Using iFax
Sending your tax forms to the IRS through paper-based methods is a tedious and long process. Save your time, money, resources, and effort by using an online fax service to accomplish your tax returns. With iFax, you can avoid the errors mentioned above and delays in your tax liabilities.
With just a few clicks, you can successfully send your tax forms to the IRS with ease and security. iFax is equipped with military-grade encryption features to ensure your sensitive information is safe.
What is more, iFax is 100 percent in compliance with GLBA and HIPAA regulations.
Start faxing online to send your tax returns accurately. Sign up for an account today.
