Do you make a mistakes on tax day?? This is tips how to recover from it..
1. I can’t find my tax information. You’re not alone. Every year, taxpayers put their tax information in a safe place as soon as it arrives in January and then promptly don’t remember the location of that safe place in April. Take a deep breath and think. You can find it (one of the folks I follow on twitter found his in the closet just this morning). And if you don’t find it today, find it tomorrow. Just be sure to file for an extension before the end of the day so that you aren’t subject to failure to file penalties.
2. I was looking for my last year tax information and found my previous year tax returns instead – still in their original envelopes. Yikes. Surprisingly, this is more common than you think. It happens for all kinds of reasons. I’ve had clients mistakenly believe that their CPA had e-filed or mailed the originals already and that those in the envelope were just copies. I’ve had other clients just forgot. And I’ve had clients that were just so freaked out that they put it aside to look at it later – and later never came. If you find old returns that were never mailed, you need to take care of it. And by take care of it, I mean file those returns before the IRS realizes that you haven’t. Mostly, it’s a matter of popping them into the post (with payment, if appropriate). But – like my mother – the IRS doesn’t like surprises. It can’t hurt to write a cover letter to accompany your prior year’s returns. If you don’t know what to say, hire a tax pro to do it. It shouldn’t cost you that much and you might be able to abate some of those penalties (this is, of course, facts and circumstances dependent). And for heaven’s sakes, people, in the future, open your mail.
3. I’m not ready. If you’re not ready, take a breath. File for an extension before the end of the day so that you aren’t subject to failure to file penalties.
4. I forgot to sign my return (or my spouse forgot to sign the return). The IRS continues to cite unsigned returns as one of the most common mistakes made on returns. A return has to be signed to be considered valid – even if you e-file (you “sign” those returns using a PIN). If you’ve already sent in the return without a signature, you technically haven’t filed a valid return. So, here’s where I break one of my cardinal rules (just see #5 below): send it again. The IRS hates, hates, hates to have two copies of the same return. But I would take the position that the first one wasn’t valid. So, make a copy of the return, sign it and send it in as soon as possible – again with a cover letter, ideally.
5. I realized that I made a mistake but I’ve already sent in my return. First, do not call the IRS in this circumstance: they really don’t want to hear it and they’re going to tell you exactly what I’m going to tell you. This is an easy fix. If you filed a valid return but realized that you made a mistake, you may need to file an amended return. You do this by filing a federal form 1040X, Amended U.S. Individual Income Tax Return (downloads as a pdf). Unlike what I said at #4, do not simply file another return — it will just confuse IRS to have two different, valid returns and you don’t want to do that. It takes a bit to process an amended return. If you have a claim for refund, be patient – the IRS says to wait about 8-12 weeks before asking about the status of your refund. If you owe tax, expect to pay interest and possibly penalties, depending on the facts.
6. I realized that I made a mistake – on purpose – and I’ve already sent in my return. Okay, so that’s not really a mistake now, is it? But still very fixable (the procedure is the same as #5 above). There’s no need to differentiate to IRS whether it was purposeful or accidental. Just fix it and move on now while your error is moot. But do it soon. You don’t want to wait and have IRS to decide it was purposeful later.
7. I don’t have enough cash to pay my tax obligation in full. Go ahead and file. Today. Not later. Don’t make a bad situation worse by adding to your potential penalties by failing to file on time. So file. Next step, assess the damage. If you owe less than $50,000 in taxes, penalties and interest, you can complete an online application to enter into an installment agreement or manually fill out a federal form 9465 (or form 9465-FS if your liability is greater than $25,000 but less than $50,000), available on the IRS web site. There is a fee for these agreements but it’s not awful – just $105 or $52 for direct debit agreements. If that’s too steep and you think you qualify, taxpayers with income at or below established levels, based on the Department of Health and Human Services poverty guidelines (starting at $10,000 for one person households), can pay a reduced user fee of $43 for establishing new agreements. If you can’t swing an installment or if you have extenuating circumstances, you can try the IRS directly (1.800.829.1040) or contact a tax pro for additional help.
8. I missed the last post office drop. Many post offices are open late to accommodate last minute filers (links on this post). If you miss the last drop, consider using a private delivery service like FedEx or UPS or e-file your return using the IRS Free File service or software from a company like TurboTax or TaxSlayer. You could also just file (quickly) for an extension via the internet and try the post office tomorrow. But if it’s just not going to happen, don’t panic. Yes, it stinks to be late when you’re so close. But it’s not going to change your life. Just file tomorrow. Penalties are based on the amount that you owe and the length of time that passes from the due date (generally, the total late-filing penalty is usually 5% of the tax owed for each month, or part of a month that your return is late) so the sooner that you file, the better.
9. I’m fairly certain that my spouse isn’t speaking to me for the rest of the day. Tax Day can be stressful for many Americans. In fact, studies indicate that it was the second most stressful day of the year in 2011 – surpassed only by that awful day of storms. Squabbles happen. Tempers flare. Traffic fatalities are up – and even Oprah is drinking tequila. But don’t let it ruin your day (or your marriage). After it’s all over, take a breath. Get a drink or go out to eat – lots of companies are offering specials today. Chocolate also helps. And promise not to talk tax for a bit. At least until you read my blog tomorrow. 😉
Happy Tax Day.