What to Do When You Make a Mistake on Your Taxes

Filing taxes can be challenging, and it’s easy to make mistakes like math errors, missing deductions, or choosing the wrong filing status. These mistakes can cause stress and financial issues. However, it’s important to know that if you do make an error, you can fix it to avoid penalties or interest. The IRS offers ways for taxpayers to amend their returns and correct mistakes.

A financial advisor who specializes in tax planning can walk you through the amendment process and help you make corrections to minimize potential issues.

What Are Your Options If You Made a Mistake on Your Taxes? 

Correcting a mistake on your taxes can be manageable. By knowing your options and acting quickly, you can effectively resolve the issue and reduce any negative effects. If you find yourself in this situation, consider these three options:

• File an amended return. If you discover a mistake after filing, you can submit an amended tax return using Form 1040-X. This form allows you to correct errors, such as incorrect income, deductions or credits. It’s crucial to file this form as soon as possible to avoid interest and penalties.
• Pay any additional tax owed. If your mistake results in additional taxes owed, it’s important to pay this amount promptly. Doing so can help reduce interest and penalties. The IRS offers different payment options, including online payments and installment plans, to make this process easier.
• Seek help from a tax professional. Consider consulting a tax professional if the mistake is complex or if you’re unsure how to proceed. A tax advisor or accountant can offer expert advice and help file your amended return correctly. This can provide peace of mind and potentially save you money in the long run.

You can also contact the IRS, if you’re unsure about the nature of the mistake that you have made, or if you want to know how to fix it. The agency could provide guidance on necessary steps and any forms you may need to complete. Be prepared to provide your tax return details and any relevant documentation.

How to Amend Your Tax Return

Amending your tax return is one of the most common ways to correct your mistake and, thankfully, it’s a straightforward process. If you discover a mistake on your filed tax return, the IRS allows you to file an amended return using Form 1040-X.

This form is specifically designed to help taxpayers make corrections to their original returns. It’s important to note that you should only file an amended return if you need to correct errors related to your filing status, income, deductions or credits. Simple math errors are usually corrected by the IRS automatically.

To file an amended tax return, you can follow these four common steps:

1. Gather all relevant documents. This includes your original tax return and any new information that supports the changes you wish to make. 
2. Complete Form 1040-X. Once you have everything in order, complete Form 1040-X, ensuring that you clearly explain the reasons for the amendments. It’s crucial to be thorough and accurate, as incomplete or incorrect information can lead to further complications. 
3. Submit the form. After completing the form, you can submit it either electronically or by mail, depending on the tax year you are amending. Keep in mind that the IRS typically allows you to amend returns for up to three years from the original filing date or two years from the date you paid the tax, whichever is later.
4. Await processing. After submitting your amended return, it can take up to 16 weeks for the IRS to process it (and, depending on staffing changes, it could take even longer). During this period, you can track the status of your amendment using the “Where’s My Amended Return?” tool on the IRS website.

Timing is essential when amending your tax return. If you’re expecting a refund from your original return, wait until you receive it before filing an amended return. This ensures that the process is not delayed. 

Additionally, in some cases, correcting a mistake might result in a refund. If you overpaid due to an error, filing an amended return can help you claim this money back. Be sure to check the IRS guidelines on refund claims to ensure you meet any deadlines.

What Are the Impacts of Tax Mistakes?

Making tax mistakes can lead to significant financial consequences that could disrupt your financial stability. 

Errors on your tax return, such as incorrect calculations or missing information, can result in penalties and interest charges from the IRS. These additional costs can quickly add up, especially if the mistake goes unnoticed for an extended period. Moreover, if the IRS determines that your error was due to negligence or fraud, the penalties can be even more severe, potentially reaching up to 75% of the underpaid tax amount.

Tax mistakes can also have a long-term impact on your financial planning. An error that results in an unexpected tax bill can strain your budget and force you to dip into savings or investments to cover the cost. This can derail your financial goals, such as saving for retirement or purchasing a home. 

Beyond immediate financial implications, tax mistakes can damage your financial reputation. Consistent errors or discrepancies in your tax filings can raise red flags with the IRS, potentially leading to increased scrutiny in future tax years.

Bottom Line

Tax mistakes are not uncommon but it’s important to act promptly to minimize any potential repercussions. First, review your tax return thoroughly to identify and understand the error. This will help to determine the corrective action you need to take. If the mistake is minor, such as a simple math error, the IRS often corrects it automatically. However, for more significant errors, such as incorrect income reporting or missed deductions, filing an amended return using Form 1040-X is necessary.

Tax Planning Tips

• A financial advisor can recommend tax strategies to reduce your liability and maximize financial efficiency. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• SmartAsset’s tax return calculator with updated brackets and rates to see how your income, withholdings, deductions and credits will affect your next refund or balance due.

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